Unlike life annuity sales, life mortgage loans are relatively recent, having been included in the French Consumer Code in 2006. What are the differences between these two contracts? How does the Prêt Viager Hypothécaire (PVH) work? Find the answers below.

A quick reminder of the principle of life annuity sales

Dating back to the Middle Ages in France, life annuity sales, as the name suggests, result in the sale of the property. In other words, as soon as you sign the contract, which is a deed of sale, the property is transferred. This deed is generally accompanied by the payment of a sum, the bouquet, which is freely defined. An annuity fixed in the contract is then paid to the vendor (creditor) by the purchaser (debtor) until the death of the creditor(s).

The seller retains the usufruct of his property until his death. As a result, he or she is able to live in the property or rent it out and receive the income.

What is a life mortgage?

The main difference with a life annuity sale is that once the loan agreement (loan offer) has been accepted, the borrower retains ownership of the property. This is done in the presence of a notary, who is responsible for registering the mortgage and checking the quality of the valuation of the property. Once the deed has been finalised, the creditor can pay the sum to the borrower in a single instalment. Depending on the lender, interest payments may also be expected. In a way, this is either a partial deferment or a total deferment, but at any time the borrower can repay part of the loan (subject to certain conditions) or all of it. This type of financing is similar to a bridging loan.

Conditions to be met

This is an attractive solution for many homeowners, but there are a number of conditions to be met. Lending institutions may have their own conditions of eligibility concerning the age, profile and insurance of the borrower, or the location of the property, for example. However, there are rules that apply to everyone. The borrower(s) must be the full owner of the mortgaged property, and the property must be used exclusively for residential purposes.

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