The forward sale

La Vente à terme
 

The forward sale, a forgotten "mortgage" by definition:

In France, this was the ancestor of mortgage credit before the advent of the banking system. Nowadays, it is used in the form of " seller\'s credit " when selling a business.

Also known as "instalment sales", this form of "life annuity" with a time limit is interesting in more ways than one.


It eliminates the uncertain nature of life annuities by providing a maximum duration of 20 years. The investor therefore knows where they are heading, especially if their ethical standards forbid them from investing in a life annuity.

Another significant advantage is that the duration of the contract is shorter than the term of a mortgage ( whose average duration is around 25 years these days).

The annual adjustment of the monthly instalments is less than the interest on a bank loan (indexed on the rental benchmark index).


In addition, contrary to a bank loan, there is no penalty in the event of an early repayment, which is a significant saving on resale (3% of the outstanding capital or the last six months\' interest in the case of a mortgage), nor are there any insurance or administrative costs.

Unlike life annuities, there is no age requirement in order to make a forward sale.


As with life annuities, forward sales can be vacant, semi-occupied, temporarily occupied for a fixed term or occupied for life.

From a financial point of view, neither the "lump sum" nor the "monthly instalments" are subject to taxation. As such, the Forward Sale differs from the Life Annuity, in which the annuities are taxed in accordance with a scale based on the age at which the life annuity is sold.

However, as with life annuities, this type of sale does not allow you to escape paying capital gains tax.


It should also be noted that, unlike the life annuity, a forward sale only expires at the end of the contract and not upon the death of the "crédirentiers".

It is therefore an alternative for people with children who wish to leave them an inheritance after their death. The remaining monthly payments can be transferred to their heirs in the event of early death.


As far as guarantees are concerned, the forward sale offers the same legal security as a life annuity: a first-ranking mortgage and a cancellation clause.

Moreover, the forward sale is a sale in its own right (only the payment is postponed). As such, ownership is transferred on the day the notarised deed is signed.

This is what distinguishes this type of sale from " rent-to-own " or " lease purchase ", where the transfer of ownership only takes place at the end of the payment period.


Finally, similarly to life annuities, and because it is a form of credit, the initial contribution, also known as "lump sum", cannot be financed by a bank unless a consumer loan is granted or another form of guarantee is put up to secure the potential financing.

In summary, the forward sale offers a viable solution for people who are "too young" to enter the " Life Annuity Market " or for vendors with children.


As such, it also offers a genuine alternative to life annuities.

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