Equity release in France is 'too complicated' say UK couple

France's system of equity release mortgages has been labelled as "too complicated" after a British couple abandoned their application due to the sheer amount of paperwork involved.

Britons Pamela and Serge Smith, both 82, approached a local branch of Banque Populaire about the possibility of a prêt viager hypothécaire (PVH) after reading about it in The Connexion, but ended up abandoning the plan, saying: “We will just continue our lives the best we can.”

The couple explained that they had wanted to release equity from their home to allow them to employ a gardener and someone to help in the house, but the process had involved “between six and seven hours” filling in forms at the bank.

“We’ve been in France for 20 years. It’s a big house, with a huge garden, and my husband has a heart problem and may have to have surgery. But we don’t want to leave – we’ve got really nice neighbours and this is our home,” Mrs Smith said.

They had hoped to obtain an €80,000 loan on their house, which had been valued at €320,000-€360,000 by a well-known estate agency.

Extensive paperwork

They said the first hurdle came when they were told the valuation was unacceptable and the bank would send its own valuer.

They were asked to provide their full house deeds and proof that the house was insured. They showed insurance documents from their insurance agent but did not have the deeds to hand, so had to obtain them from their notaire – the bank then copied the entire 86-page document.

They also needed income and taxe foncière statements, which they supplied.

The next sticking point came when they provided their birth and marriage certificates but were told they needed to supply copies less than six months old, which they were unsure how to do. The bank then asked them to obtain further proof of insurance directly from the insurer.

Another hoop to jump through was a requirement to open an account with the bank.

“My husband was getting really stressed about this, and he’s not well at all,” Mrs Smith said. “We have this huge lawn that’s looking like the Gobi desert now. But we were more concerned that, if Serge has an operation and is bed-bound, we should be able to pay for someone to come in and help.”

“We wanted to inform other readers just how complicated and, in some cases, unnecessary some of the demands are,” the couple said.

Why the bank requires the documents

A spokesperson for the Banque Populaire Caisse d’Epargne (BPCE) group said the PVH is a highly regulated loan.

“The bank is required to comply with numerous regulatory requirements and lending guidelines, which are designed, in particular, to ensure that the customer receives sound advice, that their capacity to make sound judgements is not impaired, and that they hold full ownership of their home, the value of which must be assessed by a qualified property expert.

“Processing an application therefore takes time and requires a number of documents to enable the bank to fulfil its due diligence obligations. Among these, the law requires that a property valuation be carried out by an independent professional holding specific certification.

"It is therefore legally impossible to base the calculation of a PVH on a simple valuation report, whether this comes from one or more estate agents, or even a notaire.”

The spokesperson said she would see if it was possible to pass on internally the fact that UK birth and marriage certificates, unlike French ones, are not updated with marginal notes recording subsequent life events, meaning a recently issued copy contains no more up-to-date information.

For information, copies of UK birth, marriage and death certificates can be obtained via the General Register Office.

What the PVH offers

The PVH, now offered by BPCE group banks and the Crédit Foncier et Communal d’Alsace et de Lorraine, can also be accessed via specialist loan brokers. Similar alternatives also exist.

Advantages include the fact that it is only repayable from your estate, unlike a traditional French crédit hypothécaire, which also involves the bank using your home as security but has a set repayment period.

In addition, it requires no borrower’s insurance or medical questionnaires, and the older you are, the more you are likely to obtain – with the opposite applying for ordinary loans, including crédits conso (standard ‘consumer’ loans).

It can be used to finance your own projects, or even to gift money to family.

Think tank the Institut Montaigne has proposed a special new kind of PVH targeted at the latter, which would be kept outside inheritance tax.