Mortgage basics
Funding renovation work: yes within a mortgage, no with a standalone renovation loan
Including renovation works in a mortgage: conditions, required quotes, release against invoices. And why a standalone renovation loan is outside my mandate.
Yes: the lender can finance the renovation work alongside the property price, within a single mortgage, secured by a guarantee, insurance, and a single monthly instalment. It lends against signed quotes and releases the funds progressively, against invoices. A renovation loan taken out on its own, without a property acquisition or a mortgage guarantee, however, falls under consumer credit as long as its amount remains within the limits of that category.
By Sandy MASCART, mandataire d'intermédiaire en opérations de banque et en services de paiement ORIAS 26000541 sous le mandat de CDV PATRIMOINE & ASSURANCE (ORIAS 14005573)
Key points
- Integrating renovation work into a mortgage is the standard arrangement for a property purchase requiring renovation: one guarantee, one insurance policy, and one single monthly instalment.
- The lender finances renovation work against signed quotes and releases the funds progressively, never based on an estimate or a budget stated orally.
- Extending the term of the loan is possible for renovation work, subject to two cumulative conditions: a minimum share and an eligible type of work.
- A renovation loan taken out on its own, without a property acquisition or a mortgage guarantee, falls under consumer credit and lies outside the scope of mortgage lending.
- The renovation lending budget, the zero-interest loan for older properties, and the green zero-interest loan are three distinct schemes that cannot be compared term by term.
Yes: the lender can finance the works using the price of the property, within a single loan. One security, one insurance, one instalment. This is one of the fundamental rules of a mortgage loan: quantify the project before signing the preliminary sale agreement.
Integrating the works into the mortgage loan: a single loan, a single instalment
This is possible as soon as the works relate to the property being purchased and are quantified by quotes under review. The loan then covers the price, fees and works, with a single security and a single insurance.
- The borrowing capacity decreases: more capital, higher instalment. Recalculate using the debt-to-income ratio rule and the instalment formula, with and without the project.
- The lender lends against quotes signed, in the name of the borrower, dated, from identified companies.
- The funds arrive upon invoice, not in a lump sum. An unused balance generally goes to the capital.
- Works carried out by yourself: only the materials are financed, upon invoice.
Extending the term thanks to the works: two conditions
The High Council of Financial Stability allows a longer term when works in an existing property delay the move-in. A minimum share of works and a subject of works from its list are required.
Rapportée au coût total de l'opération. Seuil abaissé par la décision du Haut Conseil de stabilité financière du 18 décembre 2023.
- En vigueur depuis le
- Source
- Décision D-HCSF-2023-6, art. 1er — Légifrance
Refusals fall on the nature of the works:
- création de surfaces habitables nouvelles ou de surfaces annexes
- modernisation
- assainissement
- aménagement des surfaces habitables ou des surfaces annexes
- réalisation de travaux de rénovation énergétique
Liste limitative : c'est l'objet des travaux qui décide, pas leur montant. Un simple rafraîchissement décoratif n'y figure pas. Pour tout chantier situé à la frontière de ces intitulés, la qualification se discute sur le devis avec l'établissement, avant le dépôt.
- En vigueur depuis le
- Source
- Légifrance
- vente en l’état futur d’achèvement (art. L. 261-3 CCH)
- contrat de construction d’une maison individuelle (art. L. 231-1 et L. 232-1 CCH)
- contrat de promotion immobilière (art. L. 221-1 CCH)
Trois cas hors travaux : la vente en l'état futur d'achèvement, le contrat de construction d'une maison individuelle et le contrat de promotion immobilière.
- En vigueur depuis le
- Source
- Légifrance
New build: off-plan purchase and construction, calls for funds.
Works budget, zero-interest loan for existing homes, green zero-interest loan: three different things
| Scheme | What it finances | Quantified value | Source |
|---|---|---|---|
| Works budget of the home loan | All works carried out on the property acquired, based on quotes | No legal threshold: it is the bank's lending policy | Lending policy, not regulatory |
| Extension of maturity for works | Nothing: it is a tolerance of duration | 10,00 % () | Decision of the High Council for Financial Stability |
| Zero-interest loan for existing homes | Acquisition accompanied by improvement works | 25,00 % () | Construction and Housing Code |
| Green zero-interest loan | Energy performance works |
|
Construction and Housing Code |
These thresholds do not measure the same thing: one may be available without the other. See the green zero-interest loan, the zero-interest loan for existing homes and the property classified as F or G.
Works loan alone: a different category of credit
Without a purchase or a mortgage guarantee, a works loan falls under consumer credit, within the amount limits of this chapter. I do not intervene in this transaction.
Au-delà de ce plafond, l'opération sort du chapitre du crédit à la consommation ; en deçà du montant plancher également. Sous quel régime elle tombe alors ne se déduit pas de ce seul plafond : c'est une qualification sur pièces, que cette page ne tranche pas.
- En vigueur depuis le
- Source
- Article L. 312-1 du code de la consommation — Légifrance
- You are buying and renovating: the works are included in the home loan.
- Already a homeowner, without a mortgage: please contact your bank or a registered intermediary for consumer credit. Above the cap, please have the regime assessed on the basis of the documents.
- Already a homeowner, new loan secured on the property: the classification depends on the structure; please ask the question before signing.
The exact scope: the pre-contractual information (FR) and what falls outside the scope, and whom to approach.
Buying a flat to renovate: three mistakes to avoid
- Signing the preliminary sale agreement before obtaining the quotes: the suspensive condition then ignores the works.
- A single global quote: two quotes per trade are better substantiated.
- Forgetting the progress payments: the funds arrive upon invoice; please provide for the means to advance.
The guarantee is based on the value after the works, which may be lower than the expenditure. Several loans, a stepped instalment? See the smoothing of loans.
Your application with works: five documents, in order
- The signed quotes, with SIRET, date and detail of the items.
- The description of the property before works and its energy performance certificate.
- The complete funding plan, including works, fees and contribution.
- The aid requested and its disbursement schedule.
- A margin for contingencies, which are discovered after the demolition.
The rest: the documents to provide.
Call with your quotes before the preliminary sale agreement, when the works budget can still change the property targeted.
Create your application with your quotes: works included.
Regroupement de crédits
Un regroupement de crédits dont la part des crédits immobiliers ne dépasse pas 60 % du montant total de l’opération relève du crédit à la consommation (C. consom., art. L. 314-10, L. 314-11 et R. 314-18). Le code impose alors la mention suivante sur sa publicité :
Un crédit vous engage et doit être remboursé. Vérifiez vos capacités de remboursement avant de vous engager
Sources
Read next
- Mortgage in Lyon: frequently asked questions
- Green PTZ: Financing the energy renovation of a home in Lyon Eligible works, amounts, co-ownership, combining with the main loan and MaPrimeRénov’: financing a renovation without hurting your debt-to-income ratio.
- What I do not do: consumer credit, reverse mortgage, standalone renovation loan My mandate covers residential mortgage lending and debt consolidation. Where the boundary lies, why it exists, and who to turn to beyond it.
- Debt-to-income ratio: the HCSF rule, its derogation margin and how the bank applies it Calculate your debt-to-income ratio as an analyst would: retained charges, residual income, HCSF derogation, and the levers to get back under the cap.
- Mortgage application: the exact list of documents to provide The documents required by profile, the order that avoids a three-week delay, and what the bank really reads in your last three bank statements.
All articles on this topic: Mortgage basics
Passer au calcul : Borrowing capacity