11. Mortgages for First Time Buyers

1. Introduction
2. Interest Free Mortgages
3. Employer Loans
4. Social Loans
5. Home Purchase Savings Accounts

11.1. Introduction

One of the distinguishing features of the French mortgage market is the availability of a range of government regulated and/or subsidised mortgages, alongside more conventional mainstream mortgage products.

These mortgages are generally used on a complementary basis to that of the principal loan and are mainly destined at first-time buyers, although not in all cases.

Indeed, it is common practice amongst French residents to purchase a property using more than one mortgage on a property, comprising one or more subsidised/regulated mortgages, together with the principal loan facility.

Most of these mortgages have numerous restrictions, the most notable of which is that they are only available to those resident in France, or those becoming resident.

So, those buying a second home can skip these pages.

11.2. Interest Free French Mortgages - Prêt à Taux Zéro

11.2.1. Purpose of Loan

The Prêt à Taux Zéro+ (PTZ+) is one of the chief instruments the French government uses to try and encourage home ownership in France.

The loan is primarily available for the purchase of a newly constructed property. However, in certain areas it can be used for the purchase of an existing older property, provided it requires major renovation.

In this latter case the scale of the works would need to be so large that the the reduced rate of VAT ordinarily available for repairs, maintenance and improvement works would not be available. It would be the full rate of VAT that would apply.

As a condition of granting the loan the property cannot be rented out as a furnished letting, or be let on a seasonal basis.

In June 2023 the government announced that from 2024 PTZ+ loans would be restricted to being offered to those purchasing a new apartment or homes in need of renovation in areas of housing stress. Further details to follow.

11.2.2 Eligible Persons

The PTZ+ is aimed primarily at first-time buyers, but those who have not owned their own home during the past two years are also eligible. Disabled persons unable to work, and those whose home has been destroyed by a natural catastrophe are also eligible.

In the latter case the application must be presented within two years of the official declaration of the natural disaster.

Eligibility is also subject to a test of maximum resources, which varies by location and number of persons in the household. In most rural areas it is around €24,000 for a single person, €33,000 for a couple, (2023), and substantially higher in urban areas of housing stress (€49,000).

11.2.3 Conditions of Loan

The maximum percentage of the loan is up to 50% for property in areas of high housing demand, but 20% in other areas. Older property needing renovation in areas of housing stress are not eligible. The interest free mortgage can only be used on a complementary basis to that of the principal loan.

The amount varies according to the size of the household, the location of property, whether it is a new or existing property and the level of energy efficiency of the property.

In terms of location, the country is divided into various zones, with the amount of the loan and eligible properties varying by zone.

The period of repayment of the load also varies according to the income of the household, with a longer period of repayment the lower your income

It is impossible within these pages to provide full details of this quite complex scheme of support.

However, if you are reasonably fluent in the French language you can use an official mortgage simulator to see if you qualify and the amount to which you may be entitled.

11.2.4. Fees

There are no fees associated with provision of this mortgage.

11.2.5. Application

Visit your local French bank, or make enquiries to any other French mortgage lender.

11.3. French Employer Mortgage Loans

There have historically been two types of employer based loans, for either property acquisition or home improvement.

These loans are called Prêt Action Logement for home purchase, whilst those for home improvement are called prêt pass-travaux.

The prêt pass-travaux loans are no longer been available.

Accordingly, until further notice the fund can only be used for property purchase.

11.3.1. Eligible Persons

The facility is funded by employer tax contributions towards a national housing fund, which provides discounted mortgages for employees.

Accordingly, it is only available to employees of a non-agricultural private company with more than ten employees.

However, the loan is not linked to a particular contract of employment and so does not need to be reimbursed if the employee leaves their employer.

Employers can decide to allocate all or part of the allocation they have available to home ownership, home improvement, or access to lettings.

The amount they each have available each year is fixed annually by the housing mutual fund to which the employer is affiliated.

11.3.2. Income Threshold

No condition of resources is required, although the loan cannot exceed 33% of income.

11.3.3. Maximum Amount of Loan

The Prêt Action Logement is a complementary loan to the principal home purchase loan facility, although it can be used for the renovation of an existing home.

The employer fixes the amount employees can borrow, which must be related to level of income, and cannot exceed 30% of the purchase price of a property.

Maximum amounts vary by region, with around €7,000 in the provinces and €25,000 in the Paris region.

11.3.4. Fees

There are no transaction costs and no guarantees on the property are required.

11.3.5. Rate of Interest

The actual rate is around 1.5%, or more in some cases.

11.3.6. Application

If you think you might be eligible it is worth making enquiries to your employer, or direct to Action Logement.

11.4. Social Mortgage Loans

'Social' loans are called prêt conventionné (PC) or prêt d’accession sociale (PAS).

11.4.1. Purpose of Loans

The mortgage is available for purchase or construction, renovation works, extensions, adaptation works and energy conservation measures.

So, whilst it is only of interest if you are permanently resident in France, you might be able to use if it you have purchased a ruin and you get into financial difficulties with the project!

11.4.2. Eligible Persons

Whilst the loans have a great deal in common, they are distinguished by the fact that the PAS is a means tested loan for the acquisition or improvement of a main residence.

The PC, on the other hand, can also be used for the acquisition or improvement of property to be let, and there is no test of resources.

In short, if you do not qualify for a PAS, you may be eligible for a PC.

11.4.3. Income Thresholds

As stated above, access to the PAS loan (but not the PC) is subject to upper income limits.

These limits depend on region and family composition, but they are not ungenerous.

In the regions there is an upper limit of around €25,000 for a couple, whilst in the Ile de France the limit is increased to around €33,000. There are significant additional increases for children.

These figures are your net income as stated on your French income tax statement. If you have yet to complete one, then you will need to produce your latest income tax statement from your home country.

The reference period for assessing your income will be the current year minus two years if applying between Jan and March, and the previous year if applying between April and December.

11.4.4. Maximum Amount of Loan

The PC can fund up to 100% of acquisition and/or improvement costs, whilst the PAS is limited to 90%. Not at all bad. A survey and valuation of the property by an independent expert is mandatory.

11.4.5. Rate of Interest

The rate of interest on the loan is high by French standards, at about +6% per annum on a fixed or variable basis. This is higher than most normal mortgage rates.

However, use of this mortgage opens access to housing benefit called l’aide personnalisée au logement - APL and potential grant assistance through the national housing agency ANAH.

This means, of course, that if you are successful in making an application for a PAS, your mortgage repayments will be reduced by housing benefit payments, and you could also be eligible for grant assistance towards renovation works!

You can also use this facility in tandem with other subsidised mortgages.

11.4.6. Application

If you think you may be eligible then you should contact your bank or local office of ANIL, the French national housing information agency.

11.5. House Purchase Savings Accounts

There exist two interest-earning bank accounts which give access to a mortgage. They are probably of little interest to most expats, as they offer few advantages, but we include them here for the sake of completeness.

These bank accounts are called are Compte Epargne Logement/Plan Epargne Logement.

Both accounts are likely to be of greatest interest to those not in a rush to obtain a mortgage and who seek an income tax shelter.

They are can also be used to assist family members with house purchase, although there are other approaches that may be more effective and efficient.

One of the main advantages of the mortgages is that there are no lender fees payable.

You can read more about these accounts at Home Buyers Savings Accounts.

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