11th January 2009

I was interested to read that there's a new form of equity release which has started here in France. It's called Foncier reversimmo, by a French bank Credit Foncier. This new equity release is different from the old 'viager' system in that the borrower remains the owner of his property, and the scheme is reversible. That is to say that if the borrower is a ditherer, he has the option of paying back his loan with the money plus the generated interest. When the owner of the property dies, it's transferred to a spouse or an heir. If the heirs want to keep the property there is the option of paying back the loan, which is not the case in a traditional viager sale.
Why the scheme is particularly interesting is that over-65s who own a property but suddenly need extra money as they get older - perhaps for a care-home - they can release funds without selling their home. The amount you can get depends on your age. At 75 you can get up to 45% of your property value, at 95 up to 75%. The factors which see the loan ended are the death of the last of the joint borrowers, if the property is sold or given away, or if the property is transferred (except for that resulting from the death of the first joint-borrower). If, on the death of the last of the borrowers, the debt is greater than the property value, the bank is responsible for the loss! So, the heirs - in leaving the property to the bank - will have no debt to pay back.
Sounds good to me - but then, you know what a worrier I am. I always need a Plan B.