• Le Monde du Viager - réseau national

The forward sale or term sale… A forgotten type of “mortgage”:

Le Monde du Viager :qu est ce que la vente à terme

It is the ancestor of the real estate credit, in France, before the arrival of the banking system. We can find it today in the form of a “seller credit” in the stock in trade sales. Still called “instalment sale”, this form of “life annuity” limited in the time is interesting in more ways than one.

It eliminates the randomness of the life annuity with its maximum duration of 20 years. The investor knows where he is going especially if his ethics prohibits him the life annuity.

Another significant advantage is that the “term” is shorter than the duration of a mortgage (for which the average term is around 25 years). The annual indexation (based on the index of rents) of the monthly payments is less compared to the interest of a bank credit.

Moreover, unlike a bank loan, there is no compensation in the case of an early redemption, which is a sizeable saving on resale (3% of the remaining capital or the last six months of interest as part of a mortgage), neither insurance costs nor fees.

It should be noted that there is no minimal age required in order to be able to sell a property via a term sale transaction, unlike the life annuity.

As in the life annuity, the forward sale can be vacant, semi-occupied, temporarily occupied for a defined term or occupied for life.

From a fiscal point of view, “cash” and “monthly payments” are not taxable. As such, the term sale is distinguished from the life annuity in which the annuities are taxable according to a scale linked to the age of the sellers. However, this sales system (same for the life annuity) does not escape the real estate capital gain taxation.

In addition, it should be noted that the forward sale, unlike the life annuity, doesn’t end with the death of the “crédirentiers”, the payments are due until the end. It is therefore an alternative for people with children who wish to leave an inheritance after their death. In fact, the remaining monthly payments are transferable to the heirs in case of death before the end of the contract.

From a guarantee point of view, the term sale offers the same legal security as a life annuity, namely: a “first ranked” mortgage and the cancellation clause.

What’s more, the forward sale constitutes a proper sale (only the payment is deferred). As such, the transfer of ownership is done on the day of the signature of the authentic act of sale. This is what differentiates this type of sale from the “lease-sale” or the “rental-accession”, where the transfer of ownership occurs only at the end of the period of payments.

Finally, like the life annuity and because of its credit characteristic, the initial contribution called “sum lump” can’t be financed by a bank with the exception of subscribing to a consumer credit or to establish another guarantee in order to possibly financing it.

To summarize, the forward sell offers a real solution for people who are “too young” on the “life annuity market” or for people with children. As such, it offers a real alternative to the life annuity sale.