Equity Release Loans
One of most used definitions of "Equity Release" is the use of a property as guarantee against a loan that provides a regular stream of revenue to the property owner. A sort of pension. This type of loan is known in France as a Credit Viager. The size of loan is defined according to actuarial criteria (age and health) as well as the condition and location of the property. The loan is due either upon death of the borrower(s), or a move into sheltered/retirement housing. Legally this type of loan in France is tightly controlled and in order to prevent mis-selling by intermediaries, it is currently forbidden for brokers to sell it.
The French Loan Market also has other products currently labeled "Equity Release" that differ from this model. The comment element, of course is, that they are loans against a property already possessed by the borrower.
Dry Loan
Like a regular mortgage the terms of the loan are up to 25 years, and rates are tied to the Euribor or Central Bank rate. Generally French banks will only lend around €150,000 for "cash flow" reasons. Loan amounts higher than this require a proof of where the funds are going.
The bank will want evidence that the funds are for legitimate purposes, not for covering hidden debts, and that they are not being invested in a project that could result in a need for more loans. Standard lending criteria apply, with regards to the ability to repay the loan.
Investment Loan
Recently, in certain areas of France (Paris and the Riviera), niche lenders from outside of France have emerged offering Equity Release loans that have an integral investment angle.
The bank will lend, for example, on a million Euro property, €700,000. Half of this money goes to the client and the other half is invested with the bank in financial products. The money earned by these products can go towards paying the interest due on the loan.
Such loans come with features not available from French Banks: 100% interest only, multi-currency options, interest roll-up. As many of the banks are not French based they can circumnavigate local lending laws, often by lending to non-Residents only, or only on secondary properties.
Borrowers need to be aware that a loan linked to fx markets or financial products brings risks that are not present in a straight or Dry loan.