Buying property with the interest free loan (IFL)
IFL (or "Interest Free Loan") is a government regulated loan, with no interest. It is granted depended on the conditions for resources, to acquire a main residence or financing certain works. 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.
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:
- 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 an IFL is not a right. The bank shall assess the creditworthiness of the applicant.
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. 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 property||Zone A||Zone B1||Zone B2||Zone C|
|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, but also:
- 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).
- old housing, 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.
An IFL can under certain conditions, finance the purchase of old social housing.
What are the IFL calculation rules?
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.
How long is the IFL reimbursement period?
The borrower benefits from a deferred repayment of 5, 10 or 15 years depending on his income and the home rental. 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.
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