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News: France to introduce Equity release equivalent

The French Government is currently working towards introducing two new financial agreements allowing home owners to free up some of the capital tied up in their properties, reports www.french-news.com.

Last month the French Government launched a wide-ranging review of the system of lending with the intention of finding ways of reinjecting into the economy part of the wealth tied up in property similar to the "equity release" system in the UK.

This spring the Government should sign a new ordinance introducing two new schemes: the Crédit Hypothécaire Rechargeable and the Prêt Viager Hypothécaire.  These loans should then be available to borrowers by the end of 2006 or early 2007.

The Crédit Hypothécaire Rechargeable is similar to equity release in the UK and operates on the basis that home owners can re-borrow the amount of money they have already paid off from their mortgage.  This money can then be used for renovation projects, inheritance schemes or for personal loans.  However, it cannot be used to clear credit card debts or to repay a commercial loan.

The Prêt Viager Hypothécaire will allow borrowers to release the capital tied up in their property in later life in order to re-plan their finances or perhaps transfer funds to their children or grandchildren. The capital plus interest would then be payable in full upon death or in cases which have yet to be defined.

Borrowers will need to consult a notaire for either of these new credit schemes who should advise you that your property will be at risk if you don't keep up with the payments.

The government is yet to decide whether the fees for the hypothèque (security) can be set at a lower rate.

Although these mortgages are not expected to be available before next year, there are currently a few banks who can already provide the equity release facility.

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