At some point in life, buying the house of your dreams, with all the luxuries that come with it (garden and swimming pool), seems at first glance to be a utopia for most French households, which do not have the means to afford it. But it is possible to achieve it. The real estate loan is an alternative allowing any person whose professional situation is stable and to whom the bank trusts (not being a “risky” profile) to invest in real estate.
What does the law say about real estate credit?
There are several laws governing real estate credit to control and protect both the lender and the borrower. The main purpose is to encourage investment. The law on real estate credit, enacted in 2018, reinstates the Eco PTZ, the zero-rate loan (extended until 2023) from which 90% of French people can benefit. Other laws aim to promote access to housing for all, including:
The Scrivener law (1979): protects the borrower who takes out a real estate loan greater than or equal to €21,500. It concerns the acquisition of a primary or secondary residence, rental investment, the purchase of professional premises and building land, and the financing of renovation work. It requires more information to be made available to the borrower and gives him or her sufficient time to reflect before signing the contract.
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- The Neiertz law of December 31, 1989: despite its repeal in 2000, it is still applied, notably for the protection of borrowers against overindebtedness (for reasons such as loss of employment, accident, or management problems). The aim is to find a positive way out of the situation.
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- The Pinel law: allows the borrower to benefit from a tax reduction by investing in a new property.
Which banks for a real estate loan?
As an indication, here are the 5 banking institutions in France which present the best offers for a real estate credit:
1. The Caisse d’Épargne
The Caisse d’Epargne offers a minimum loan amount of €50,000, with a ceiling of €500,000, for 5 to 25 years. The interest rate applied changes according to the duration of the loan:
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- 0.67% for a 10-year loan term,
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- 0.83% for 15 years,
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- 1.05% if the loan is for 20 years,
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- 1.23% if the loan is spread over 25 years, which is still interesting compared to the rate offered by other banks.
At the Caisse d’Épargne, you are not obliged to subscribe to the lender’s insurance. The help of a loan insurance broker will be offered to you. It gives you the possibility to compare several loan insurances.
2. Credit Mutuel
This bank offers an attractive interest rate of 0.90% (2022), with an effective total rate (TEG) of 1.54%, slightly higher than that of Axa Bank. The advantage of taking out a real estate loan with Crédit Mutuel is that the bank does not set a financing limit. The duration of the loan can be up to 25 years.
3. Crédit Agricole
The real estate interest rate at Crédit Agricole is slightly up but remains interesting compared to the competition. It is 1.35% (up from 1.20% in 2017), with a TEG of 1.70%. Crédit Agricole offers a loan term of up to 25 years. You can lower or increase the monthly loan repayment (up to 30%) several times during the loan term.
4. Société Générale
Société Générale offers a loan term of up to 30 years, with an interest rate of 1.47% (updated in 2022), i.e., with a TEG of 1.62%. The application fee at Société Générale is 1% of the amount borrowed. The bank proposes a monthly repayment according to the chosen duration, with the possibility of deferring the first months to undertake the work.
5. Axa Bank
Axa Bank offers a real estate interest rate of 1.55%. The real cost of credit at Axa is 1.62%, which is still reasonable compared to the competition. The file fees at Axa are 800 €. The bank offers loan terms between 6 and 25 years, with an annual account maintenance fee of €50. It allows a debt ratio of 33%.
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