Indemnités de remboursement anticipé explained: early repayment charges in France

What early repayment charges are

You can repay a French mortgage early, in full or in part. In return, the bank may charge indemnités de remboursement anticipé (early repayment charges, often shortened to IRA) for the interest it loses. Whether they apply, and how much, is set in your loan offer, within a cap fixed by law.

Before you repay, ask the bank in writing for its figures. For loans signed since July 2016, it must tell you the amount and the costs free of charge.

The legal cap

On a fixed-rate loan, the charge cannot exceed the lower of two amounts:

• six months' interest on the capital repaid early, at the average rate of the loan
• 3% of the capital still owed before the repayment

Separately, the contract may refuse partial repayments of 10% of the original loan or less, unless you are repaying the whole balance. After a partial repayment, you choose between keeping the same instalment over a shorter term or a lower instalment over the same term.

Worked example: repaying after eight years

Assumptions: €300,000 borrowed over 20 years at a fixed 3.60%, no waiver in the offer. After 96 monthly payments, the amortisation schedule shows €205,005.88 still owed.

• Full repayment. Six months' interest is €205,005.88 × 3.60% ÷ 2 = €3,690.11. 3% of the capital owed is €6,150.18. The maximum charge is the lower figure, €3,690.11.
• Partial repayment of €50,000. Six months' interest on €50,000 is €900. 3% of the capital owed is still €6,150.18. The maximum charge is €900.
• Sale after a change of workplace. If you sell because your place of work or your spouse's changes, nothing is due.

Against the €3,690.11, repaying in full at this point saves the €47,762 of interest still to come under the schedule.

When nothing is due

The law rules out any charge when the early repayment follows the sale of the property because of:

• a change in the place of work of the borrower or their spouse
• the death of the borrower or their spouse
• a forced end to the professional activity of the borrower or their spouse, such as a dismissal

These exemptions apply to loans signed since 1 July 1999. Keep the evidence, such as an employer's letter, and send it to the bank with your request. A sale for any other reason, including a move you chose or a sale to buy elsewhere, falls under the normal cap unless your offer says otherwise.

What to negotiate before you sign

Early repayment terms are set in the offer, and the time to improve them is before you accept it. Banks can reduce the charges or remove them altogether. Common requests:

• no charge on a sale of the property, whatever the reason
• no charge after a set number of years
• no charge on partial repayments up to a yearly amount
• no charge when you repay from your own savings rather than with a loan from another bank

A waiver on a sale matters most to non-residents buying a second home, since a sale usually follows a change of plans rather than one of the legal exemptions.

Selling or remortgaging

When you sell, the notaire repays the capital still owed from the sale price, with any charge due, and arranges the release of the bank's mortgage charge. The guide to selling from abroad covers the tax side. When you remortgage, the new bank repays the old one and the charge applies in the same way, so set it against the saving on the new rate, along with the new guarantee and fees. Current rates are on the rates page.

Check the clause in your offer before you plan either move. If you are still choosing a loan, start with the eligibility check and ask the broker to negotiate the early repayment terms along with the rate.

Questions