Life mortgage - Loan with periodic interest repayments

Project funding

A mortgage is a loan that allows you to review money by providing a house that belongs to you as collateral.

You can use the loan for a personal project (travel, car, stay in a retirement home), but not to finance a professional activity.

This type of loan is often used by seniors.

Difference from life selling and conventional mortgage

Mortgage life loans should not be confused with sale in life and the classic mortgage.

• In the case of a life sale, the ownership of the house is transferred to the buyer, while the mortgage life loan allows you to remain the owner.

• The traditional mortgage requires you to periodically repay some of the principal and interest, while the life mortgage allows you to not repay the principal during your lifetime.

Data subjects

To apply for a mortgage life loan, you must own the home you want to pledge as collateral.

There is no obligation to take out home insurance or to insure the loan.

There is also no medical questionnaire to be filled out, nor any condition of resources to be filled out.

But you must be an adult.

Property concerned

The dwelling used as security must be for exclusive residential use. This means that it must only be used as a dwelling and not as a business premises.

This property may be a principal residence or a secondary residence or a rented property.

You can apply for a loan from a credit organization that offers this product.

The lender (called the lender or creditor) will then set the loan amount based on 3 criteria:

• Value of the property, determined by an expert, chosen by you and the lender (the expertise costs are at your expense)
• Your age (if you are young, the loan amount will be less important, as there will be statistically a long interest calculation period)
• Your gender (since women have a longer life expectancy than men, they also have a longer probable interest calculation time than men)

The creditor may refuse the loan if he considers, for example, that the property is likely to lose value.

If the application is accepted, the total amount of the loan does not correspond to the value of the property pledged as security, but only to a part. In general, the loan granted varies between 15 and 75% of the value of the property.

The lender is required to set an interest rate that includes all the costs of the loan (application fees, interest, borrower insurance). This rate is called the annual percentage rate of charge and it's used to calculate the amount you have to repay if you want to make an early refund. This rate will also be used to calculate the amount owed by your heirs if they want to repay the bank and keep the property.

The lender is free to set the rate, and they're generally quite high.

However, the annual percentage rate of charge may not exceed wear rate over a 10-year period. There are 3 rates of wear and tear depending on the amount of the loan: amount less than or equal to €3,000, amount between €3,000 and €6,000 and amount greater than €6,000.

The amount of the periodic interest payments must be specified at the outset. You have to repay these maturities during the term of the loan.

Mandatory information

Before signing, the bank must send you a loan offer that indicates the following:

• Identity of the parties (borrower and financial institution)
• Date and nature of the loan
• Exact description of the mortgaged property and its value
• Date and conditions for making available the borrowed sum (in one go or payment of a monthly annuity)
• Overall cost of credit and annual percentage rate of charge
• Amount and date of periodic interest payments

There shall be a minimum of 10 calendar days between the receipt of this offer and the signature of the contract.

Signature of contract

The signature is done in front of a notary.

The costs are at your expense.

The notary must check that the property has been correctly estimated.

Maintenance of the property

You must maintain the mortgaged property (facade renovation, various works, garden maintenance...). In the event of poor maintenance, the lender can claim early repayment of the loan.

An inventory may be annexed to the notarial act at the time of signature of the contract. It will constitute proof of the condition of the property and its equipment.

In the event of a dispute, it is up to the lender to prove that the property has been improperly maintained.

Periodic repayment of interest

You must pay the monthly interest payments provided for in the contract.

Failure to repay one or more periodic interest payments shall be punished by the payment of compensation of up to 4 months' interest.

In addition, the lending institution may require the repayment of all the capital lent.

Rental of the property

If you wish to rent the mortgaged property, you must first obtain the written agreement of the lender. The mortgaged property may in no case be assigned to a professional activity.

The loan agreement can be terminated in several ways: early repayment, sale of the property, death of the borrower.