What are French “viagers” and how do they work?

Posted on 09 Sep 2020 in Market
What are French “viagers” and how do they work?

The “Viager” contract is based on a simple principle: a senior sells his property to a purchaser who agrees to pay him a life annuity and a “bouquet”. This allows the buyer to invest in real estate for much less while ensuring the financial security of the seller until the end of his life.

Why are buyers interested in it?
This makes it easy for you to become an owner, without having to advance too much. On the other hand, you do not know the exact cost price of your property. It depends on the lifespan of the seller. Therefore, you can pay a price higher or lower than the actual value of the property.

How much does it cost?

The classic viager consists of a bouquet and a monthly payment until the end of the seller’s life. But it greatly depends on the agreement between the two parties and negotiation is possible. If the amount of the bouquet is high enough, the life annuity will be all the less important. In agreement with the seller, it is also possible to buy a life annuity without giving a bouquet (but paying a much larger rent).

To calculate the total cost of the sale, we start from the price of the property and use it to determine the rent to be paid. After deduction of the bouquet, the remaining amount to be paid is converted into an annuity according to the average life expectancy. But an unknown variable appears in this equation: the real life expectancy of the seller.

The different types of viagerThere are 3 types of viager. The first and the most common one is the occupied viager. The seller keeps usufruct of the property (he can keep living in it or renting it) until the end of his life. The “free” viager, on the other hand, gives to the buyer also usufruct in addition to the bare property. The buyer will still have to pay the life annuity to the seller. The third type of viager has the particularity to be limited in time (usually 10 to 15 years). This offset the risk for the buyer but is more expensive.

How can we, at French Private Finance, help you?
FPF is connected with a mortgage broker specialized in out of the box deals in France. It is possible to purchase a property through “demembrement” which means that you can buy the bare ownership (nue-propriété) and profit from the usufruct after a limited period of time (usually 10 to 15 years) or earlier, at the passing of the current usufruct owner. It is slightly different than the ‘’viager’’ but very similar and safer as you are guaranteed to get the usufruct.

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