Real estate professionals have come up with the idea of making home loans portable or transferable across the board, to help French people buy their own home.
Do you own a home that you bought with a loan? If you want to sell it to buy a new property, you will have to repay the outstanding capital and then apply for a new loan. This is a common practice, but it has a number of disadvantages. Early repayment usually involves penalties that are often the equivalent of six months' interest. And given the current climate (with the average borrowing rate rising from 1.07% in January 2022 to 3.15% in April 2023, according to the Crédit Logement/CSA Observatory), it's unlikely that you'll get a better borrowing rate for your new loan. You may also be blocked by usury rates (rates above which a bank cannot lend money). The sum that the bank granted you for your first purchase may also be lower for this new purchase, particularly if your borrowing capacity has fallen.
Unblocking the property market
At a time when the property market has slowed considerably in recent months as a result of the rapid rise in lending rates, the Fédération nationale de l'immobilier (FNAIM) has put forward an idea to unblock the situation: systematise the portability and transferability of loans, two mechanisms that were in force until a few years ago.
"A homeowner can keep the loan he or she took out for the property he or she wishes to resell in order to finance a new purchase," says the FNAIM, which is calling for "all new loan contracts to include a clause authorising the portability and transferability of the loan for a set period of time".
Portability: keeping your borrowing rate low
Loan portability means keeping your mortgage when you sell your property to buy another. In practical terms, once the deed of sale has been signed, the seller has the entire proceeds of the sale in his or her account, including the amount of the initial loan, as well as any initial contribution and potentially any capital gains. In return, you must continue to repay the loan each month.
There are many advantages to this: you can keep your borrowing rate low, as well as certain terms and conditions of the loan (such as rescheduling or deferring instalments), you can keep your loan insurance, avoid repayment penalties and save on certain costs (guarantee fees, administration fees, etc.).
Transferability, to make sales more fluid
Loan transferability is a different mechanism. It involves attaching the loan to the property rather than to the borrower. "This allows the loan initially granted to the previous owner to be transferred to the new buyer," says the FNAIM.
The main advantage of this arrangement is that it would make transactions more fluid, particularly when a buyer is blocked by usury rates, for example. "There are no legislative or regulatory obstacles to this," it asserts.
Translated with www.DeepL.com/Translator (free version)
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