How to Use Your Primary Residence as Collateral for a Loan
Having worked their entire lives, paid off every last euro of their mortgage, and ending the month with just a few dozen euros left in their checking account. This situation affects a growing number of homeowners: nearly seven out of ten people over the age of 60 own their homes, which are often valued at more than 300,000 euros. But that home doesn’t pay for home repairs, home care, or the financial support one would love to give their children.
Being rich is no longer enough to convince your banker
Once you reach a certain age, access to credit dries up—even for borrowers with good credit. Age and the lack of earned income make loan insurance prohibitively expensive to begin with. Its cost is then factored into the annual percentage rate (APR), which cannot exceed the usury rate—a legal cap revised quarterly to protect households from predatory lending. The insurance premium alone is then enough to push the APR over that threshold: the bank is no longer allowed to lend, even to a homeowner willing to cover the additional cost.
Yet income drops by 30 to 45 percent upon retirement—precisely when the money stops flowing. Many turn to consumer credit, which is more expensive and riskier, even though they have a much more solid source of capital right under their own roof.
Borrowing against Your Home Without Leaving It
The most straightforward solution has a rather austere name: the reverse mortgage. It involves borrowing a sum secured by your home while remaining the owner and occupant, with no monthly payments. The principal—paid out as a lump sum or converted into a guaranteed lifetime annuity—is repaid, including interest, only upon the borrower’s death or the sale of the property. Although regulated in France since 2006, it remains largely unknown.
The amount depends on the property’s value and, above all, on age, which becomes an asset here: the older you are, the more you can access. For a home worth 300,000 euros, a 72-year-old retiree can generally access up to 100,000 euros, while an 85-year-old can access up to 150,000. The loan amount ranges from 20 to 60 percent of the property’s value, with no income requirements or health questionnaire.
There remains a legitimate concern: leaving debt to one’s children. A 65-year-old homeowner with a property worth 560,000 euros takes out a loan of 150,000 euros; fifteen years later, the house is worth 811,000 euros, and the loan balance stands at 274,000. The heirs can either pay off the loan and keep the house or sell it: the debt can never exceed the property’s value, and any surplus goes to them.
These benefits come at a price: an overall interest rate of around 7.6% over 15 years, and interest that compounds in the absence of monthly payments, meaning the total cost increases the longer the borrower lives. The rules are strict: the property must be a residential home in metropolitan France, valued at more than 150,000 euros, with maintenance costs borne by the borrower, and the contract must be signed before a notary.
Staying in Your Home, Getting Out of Debt, Passing It On in Time
An 80-year-old retiree, who owns a country house worth 500,000 euros, took out a loan of 112,000 euros to adapt her home to her chronic pain and remain in her home. A couple overwhelmed by loans taken out to help their children paid off all their debts with 110,000 euros.
The third use is the most strategic: passing on assets at the right time. Inheritance now accounts for 60% of household wealth, compared with 35% in the early 1970s. But people typically inherit around age 50, and that age will rise to 58 by mid-century—by which time children have settled most of their lives: housing, family, and career. The money arrives when it no longer makes much of a difference. Tapping into one’s home equity reverses this timeline and makes it possible to give while still alive, even without savings.
Other options
For those with larger estates or who are still working, a traditional mortgage secures financing against a property they already own: monthly payments, but for much larger amounts. Another option bypasses borrowing: selling a share of the home to an investor, with the seller remaining a co-owner and occupant, without incurring any debt. For a property valued at 500,000 euros and a need for 50,000 euros, approximately 18 to 19% of the property must be sold, with the difference covering the investor’s fees and return.
No single solution is universal: the choice depends on age, the property’s value, plans for passing it on, and the intended use of the funds. The real obstacle, however, is not financial but informational: the vast majority of notaries and wealth management advisors never mention these options on their own initiative.
