Buying property with the interest free loan (IFL)

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IFL (or "Interest Free Loan") is a government regulated loan, with no interest or administration fees. It is granted depended on the conditions for resources, to acquire a main residence or financing certain works. Moreover, you must not have owned your home during the two years preceding the loan. As for the amount which is granted, it depends on the geographical area of the accommodation.

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The IFL cannot be used to finance 100% of the real estate project: it is limited and must be supplemented by other real estate loans or a personal contribution. 

News:

A decree published in the Official Journal on November 15, 2020 expanded the eligibility conditions for the zero-rate loan for first-time home buyers through a lease-purchase agreement for real estate.

Moreover, the finance law n°2020-1721 of December 29, 2020 extended the zero rate loan until December 31, 2022. It also provides for the modification of the conditions of resources during a request for a zero rate loan in 2022. As of January 1, 2022, the total amount of income will be assessed on the date of issue of the loan offer.

The terms of zero-rate credit are constantly evolving in order to promote social access to property for low-income households, especially for a first-time acquisition project.

Who can benefit from IFL?

The "Interest free loan" is reserved, depending on the conditions of resources, for first-time buyers or people who have not owned their main residence for at least 2 years. However, this condition is not required and disappears if the borrower (or one of the occupants of the accommodation) is:

  • usufructuary or bare owner of his main residence,
  • holders of a disability card and unable to work.
  • beneficiaries of the disabled adult allowance or the education allowance for disabled children.
  • or if they occupy a home which has gone through a disaster (natural or technological, for example) and which has, as a result, become permanently uninhabitable.

Please note that obtaining a loan is not a right. The bank shall assess the creditworthiness of the applicant. 

Before any real estate project, it is recommended to get in touch with your bank to analyze your current situation. The PTZ application is examined by the bank in regard to the applicant's situation (stability, income, consumer credit, etc.) as for any mortgage.

The application for a credit on a zero-interest basis  is made in addition to at least one other loan (social accession loan, bank mortgage loan, contract loan, etc.).

To be noted: When a credit on a zero-interest basis  loan beneficiary desires to change their primary residence, they can request the transfer of their PTZ.

Moreover, when a person owns a home that is not their primary residence, they can claim the credit on a zero-interest basis.

Through what conditions of resources?

The borrower's resources must not exceed a certain limit, which is set according to the housing situation zone (zone A, B1, B2, and C) and its number of occupants.

The amount of income to be taken into account corresponds to the reference tax income of the borrower, but also the tax income of each future inhabitant when it is not fiscally attached to the borrower.

The tax income to be retained is that of year n-2 (2019 for 2021). However, 2022 onward, the income taken into consideration for a (PTZ) loan application will be assessed on the date of issuance of the loan offer.

Example: 45,900 euros is the maximum income that a household made up of 3 people must not exceed, to benefit from an IFL which is destined to finance housing located in zone B2.

In 2016, the IFL was extended to almost the entire country, with an increase in the income limit (in euros):

Interest-free loan : conditions of resource

Number of persons destined to live in the propertyZone AZone B1Zone B2Zone C
1 person€37,000€30,000€27,000€24,000
2 people€51,800€42,000€37,800€33,600
3 people€62,900€51,000€45,900€40,800
4 people€74,000€60,000€54,000€48,000
5 people€85,100€69,000€62,100€55,200
6 people€96,200€78,000€70,200€62,400
7 people

€107,300

€87,000€78,300€69,600
8 people and more€118,400€96,000€86,400€76,800

Source : Ministry of Housing

What are the housing requirements?

The housing must become the main residence of the borrower for a period of 6 years from the loan’s payment (this condition can however be eased in certain cases, mainly when the loan is used to finance a housing which is intended to become the main residence of the purchaser at the time of retirement). After this time period, it can be rented.

The occupancy of the premises must take place no later than 1 year after the date the work’s completion, or 1 year after the date of acquisition of the accommodation, if this takes place later, The IFL can finance the construction or purchase of any new housing.

Other projects located in zone B2 or C can obtain a PTZ:

  • the purchase of old housing with major works assimilating taxes, in terms of a new premises.
  • the transformation of premises, new or old, into housing (fiscally assimilated to new premises).
  • purchasing an old housing (including the contract for the sale of a building to renovate, the lease-purchase contract), the works which represent 25% of the total cost of the operation (i.e., at least one third of the purchase value of the housing alone). These works correspond to the creation of additional living space or to the modernization, sanitation or development of living spaces or energy saving work.

When there is construction or improvement work, it should never begin before obtaining the PTZ.

An IFL can under certain conditions, finance the purchase of old social housing.

Careful: Works in old housing should make it possible to limit the annual energy consumption of the housing to 331 KWh/m2 in order to benefit from the PTZ.

Only one credit can be authorized per real estate transaction.

What are the IFL calculation rules?

The amount granted under the PTZ depends on the location of the property. As for the total cost of the operation taken into account in the calculation of the credit, it is limited according to the location of the accommodation and the number of occupants. This total cost of the operation includes the construction or purchase price of housing (old or new), works and negotiation fees.

To find out the amount of IFL which is authorized, a percentage is applied to the maximum cost of the operation, up to a limit (40% of the operation cost). This cost includes the construction or purchase price and negotiation fees.

Example: for a household of 3 people who wish to acquire housing located in zone B2, the maximum cost of the operation is 187,000 euros. The maximum amount of the IFL shall be 187,000 euros (maximum cost on which the IFL is calculated depending on the location and the number of occupants of the accommodation) x 40% (maximum percentage) = 74,800 euros.

Note: Only financial institutions such as banks that have signed an agreement with the State can grant a PTZ. The application for a mortgage is always to be made with a bank. Moreover, the PTZ limit, the amount of credit granted also depends on the borrower's situation (professional, marital, consumer credit, …).

Calculate the amount of the PTZ to which you are entitled on the ANIL french website

How long is the IFL reimbursement period?

The duration of the loan repayment leans on several elements:

  • the borrower's income,
  • the total cost of the operation,
  • the number of occupants,
  • the geographical area of the accommodation

The borrower benefits from a deferred repayment of 5, 10 or 15 years depending on his income and the home rental. The deferral period is the period during which the borrower does not pay the loan. Therefore, the total duration of the loan can be up to 20, 22 or 25 years.

The higher the borrower's income, the shorter the loan term.

It should be noted that if the beneficiary of this loan sells his home to buy a new one, he can request the transfer of his IFL (subject to the bank agreement, issuing the IFL) on his new purchase.