Equity release vs remortgage in France

If you know the UK or US systems, you are probably thinking of a remortgage: replacing your existing mortgage with a new, larger one, and taking the difference in cash. France works differently. With a mortgage-backed loan, you keep your existing mortgage exactly as it is, and borrow on top of it against the same property.

PraxiFinance does not buy back or renegotiate your current loan. It structures new financing alongside it. But there is one firm condition, and it is where most enquiries fall down: your income must be able to service both loans at once.

Remortgage versus mortgage-backed loan

A remortgage, in the Anglo-Saxon sense, replaces your existing loan. It means renegotiation, early repayment charges, and starting the mortgage again. PraxiFinance does not do this, and does not arrange it.

A mortgage-backed loan adds new financing secured on a property you already own, without touching your existing mortgage. Your current loan stays in place, at its current rate, on its current terms. The new loan sits alongside it.

In practice, one of two arrangements applies: a lender that finances without regard to your existing mortgage, or a lender that ranks in second position behind it. For you, the borrower, the result is the same. Your existing loan is untouched, and you receive new liquidity. The ranking is a matter between the banks; it does not change what you receive.

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The 70% ceiling includes your existing mortgage

You can borrow up to 70% of the property value. This ceiling is calculated on the total value of the property, and it includes any mortgage already secured on it.

Take a property worth 1,000,000 euros with 400,000 euros still owed. The 70% ceiling is 700,000 euros. Deduct the 400,000 euros already borrowed, and the theoretical room to release is 300,000 euros.

But theoretical room is not eligibility. That is decided by income.

The real test: can your income carry both loans?

This is the condition that matters, and the one most people underestimate.

Your household income must be at least three times the sum of your existing monthly mortgage payment and the new monthly repayment. Property value alone is never enough.

Take the same example. The owner currently pays 3,000 euros a month on the existing 400,000 euros. A new loan of 300,000 euros over 25 years at 5.7% adds 1,878 euros a month. Total monthly commitment: 4,878 euros. To qualify, the household must earn at least three times that, so about 14,635 euros a month.

An owner who cannot comfortably carry both payments will not qualify, whatever the property is worth. This is not an arbitrary rule. A partner bank will never grant a loan whose combined repayments the borrower cannot service.

Eligibility criteria

You are eligible if all of the following apply.

You are a tax resident in France and you live in France.

Your property is in metropolitan France and worth at least 300,000 euros.

You want to borrow at least 100,000 euros, up to 70% of the property value including any existing mortgage.

Your household income is at least 4,000 euros per month, and at least three times the sum of all your monthly loan repayments, existing and new.

The property is held in your own name. Properties held through an SCI are not eligible for this solution.

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Rates, fees and duration

Rate 5.7% per year for an amortising loan, up to 25 years. Rate 6% per year for an interest-only structure, up to 15 years. Arrangement fee 8.5% of the amount borrowed.
On the 300,000 euros released in the example above, the fee is 25,500 euros, so the owner receives 274,500 euros.

Why keeping your existing mortgage is an advantage

In many countries, releasing cash means giving up the loan you already have, often one taken out at a lower rate than today's. That can be costly.

In France, you keep it. Your existing mortgage, and its rate, are preserved. You simply add a second layer of financing for the amount you need. For owners with a favourable existing loan, this is a real advantage over a full remortgage. See borrow against property in France.

If you cannot carry both loans

If your income cannot service both your existing mortgage and a new repayment, a mortgage-backed loan is not the answer, and no responsible intermediary should arrange one.

If you are selling the property, or intend to sell it, a deferred-price sale may apply instead. It is assessed on the property, not on your income. Your existing mortgage is repaid at completion from the proceeds. It is open to owners domiciled abroad and to properties held through an SCI. See the deferred-price sale simulator and debt on French property: what to do.

About PraxiFinance

PraxiFinance has specialised exclusively in property-backed finance in France since 1990, with offices in Paris and Nice. The firm is registered with ORIAS under number 13005512 and operates within the regulatory framework of the ACPR.

It processes more than 4,000 financing requests per month and publishes the only recurring barometer of the French property-backed lending market. It is regularly cited as a market reference by Les Echos, La Tribune, Le Monde and BFM. See best equity release companies in France.

Call +33 1 85 09 70 40 to check whether your income supports the operation.

FAQ

Does PraxiFinance replace or buy back my existing mortgage?

No. Your existing mortgage stays in place. PraxiFinance structures new financing alongside it, against the same property.

Is the 70% calculated before or after my existing mortgage?

The 70% ceiling is on the total property value and includes your existing mortgage. The room to release is 70% of the value minus what you already owe.

What income do I need?

At least three times the sum of all your monthly repayments, existing and new, with a floor of 4,000 euros per month.

I have a large property but a big existing mortgage. Can I still borrow?

Only if your income covers both the existing payment and the new one, at a ratio of three to one. Property value alone is not enough.

Does the second-ranking arrangement change what I receive?

No. Whether the lender disregards the existing mortgage or ranks behind it is a matter between the banks. It does not change your loan or your repayment.

Can I use a property held through an SCI?

Not for a mortgage-backed loan. Properties held through an SCI are eligible for a deferred-price sale.

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