The life annuity mortgage loan was created in 2006 (security reform). It allows a person who owns real estate to borrow money without having to repay the capital or interest during his lifetime.
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How does life annuity mortgage loan process work?
The amount may not exceed the value of the hypothecated immovable.
The funds lent by the bank can not finance a professional activity. They may be withdrawn by the borrower either at once or in regular payments, every month or quarter for example.
The normal term for repayment of the loan is the death of the borrower. It is on this date that the heirs will have to repay the principal and pay the interest. However, it is now possible to provide for a periodic repayment of interest (Law 2015-992 of 15 August 2015).
Break of the life annuity mortgage loan and prepayment
The mortgage life loan may end before the death of the borrower in the following circumstances:
- Prepayment of the loan,
- Sale, donation in full ownership or donation in dismemberment of mortgaged property.
Since this loan is based on an estimate of the value of the property given as security on the death of the borrower, he must ensure the proper maintenance of his building. Thus, the early repayment may also be requested under the following assumptions:
- Loss of value of housing mortgaged by the borrower,
- Refusal of access to the mortgaged property to the banker to enable him to ensure his good state of maintenance and conservation.
Finally, the default in the periodic repayment of interest, if the borrower had opted for this formula, may also result in repayment of the loan. In practice, this mortgage life loan system is intended especially for the elderly, owners of property, with insufficient income, and / or wishing to obtain capital to finance a project (travel or work for example).
This contract, given its consequences on your inheritance (which can be totally absorbed if it includes only mortgaged housing) must be well studied, especially if you have children.