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French property: What is a PEL and can it help offer a lower mortgage rate?

Whether you are a first-time home buyer or you are looking to refurbish your home, this French savings programme can help you save and get a more attractive rate for your loan.

French property: What is a PEL and can it help offer a lower mortgage rate?
Keys displayed in a property advertisement (Photo by FRED TANNEAU / AFP)

If you are looking to buy a home in France – or refurbish a property – then you might consider either the PEL (Plan épargne logement) or CEL (compte épargne logement), which are French savings plans that can help you secure a more advantageous personal loan rate or mortgage.

Essentially, one opens a PEL or CEL with the intention of investing in French property within the coming years, and the plan helps to facilitate that saving with a higher cap than other generic savings accounts.

Before opening a PEL or CEL plan, however, there are a few things you should know:

Who should open a PEL or CEL?

Financial advisor Maeve Hoffman, a partner at Spectrum IFA Group, “definitely recommends” opening PEL or CEL “for first time homebuyers.” Those looking to refurbish existing property might also consider opening a PEL or CEL.

The savings programme “helps to demonstrate to your bank that you can save and that you have enough to pay a mortgage.” 

After the saving term, the account owner “can take out a mortgage or personal loan for renovations at a better rate.” 

Things to consider before opening a PEL or CEL

If you already have a lump sum prepared for purchasing a home, this option is probably not for you. Instead, you might consider placing your funds in a CAT – Compte à Terme. This is a savings account with a higher rate of interest than a generic savings account, like a Livret A.

It is only available for a specific amount of time, so if you have a clear timeline of when you will be purchasing the property or paying for the refurbishment, you might consider putting the funds into a CAT so they can earn a bit more interest than they would in a generic saving’s or current account. 

This must be done by signing a contract with a bank, and by specifying the term of the investment (meaning you as the investor would not have access to those funds during the set-time). The contract will also specify the type of interest rate. Keep in mind that interest accrued would be subject to income tax and social security deductions.

For those looking to grow their investments for other purposes, then you can find detailed information for Brits living in France HERE and for Americans HERE.

READ MORE: What is a Livret A and should foreigners living in France open one?

As this savings plan is opened with your bank, it “locks the investor into that particular bank,” Hoffman explained. This means you would likely need to go through this bank for your personal loan or mortgage. 

The savings plan also has a minimum period of investment, and depending on whether you open a CEL or PEL (see below) a minimum amount should be continuously deposited into the account.

US citizens should keep in mind that they must disclose any non-US bank accounts that held $10,000 or more at any one time in the year – you do this when you file your annual tax return, you have to include a Foreign Bank Account Report (FBAR).

What is the difference between a PEL and CEL, and how do they work?

The PEL is an accumulated savings that can be used to obtain a mortgage or loan on more advantageous terms. The maximum amount you can pay into the PEL is €61,200.

PELs have a minimum (four years) and maximum (ten years) contractual duration. After 10 years, you can no longer make payments, but your PEL can continue to earn interest for up to five additional years.

The minimum initial deposit is €225, and you must continue to deposit money into the account in accordance with the terms of your individual contract. If you fail to do so, the account will be automatically closed. You can choose between an option to pay into the account on a monthly, quarterly, or semi-annually basis, though on a yearly basis you should deposit at least €540.

Depending on whether you opened your account prior to or after 2018, you may benefit from a government bonus when purchasing the property you were saving up for. Additionally, the timeline of when you opened your account determines whether interest earned on your savings are taxable. 

Interest earned on a PEL account opened after 2018 is subject to income tax and social security deductions. Every year, your bank should provide you with a statement showing the amount of interest earned on your PEL and the amount of the single flat-rate levy.

As of December 2022, the interest rate was one percent.

The second option is the CEL. You need to start the account with a deposit of €300, and you can save up to €15,300 in the account. With a slightly higher interest rate of 1.25 percent, the minimum yearly deposit for a CEL is €75. 

Interest accrued for a CEL opened after 2018 is also subject to French income tax and social security contributions. 

The biggest difference between the two is how easy it is to access the funds inside the account – releasing funds from a CEL is hypothetically easier than from a PEL, where the money is meant to be blocked away for at least four years and early withdrawals can lead to penalties.

As of December 2022, the interest rate for a CEL was 1.25 percent.

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POLITICS

Rugby tickets, coffee and stickers – French presidential candidates chastised over expenses claims

From coffee runs to rugby tickets and professional photos - France's election financing body has revealed some of the items it has refused to reimburse from the 2022 presidential race.

Rugby tickets, coffee and stickers - French presidential candidates chastised over expenses claims

Spending on the election trail is tightly regulated in France, with maximum campaign spends per candidate as well as a list of acceptable expenses that can be reimbursed.

In France the State pays at least some of the election campaign costs, with the budget calculated according to how many votes the candidate ends up getting. 

READ MORE: 5 things to know about French election campaign financing

On Friday, the government body (la Commission nationale des comptes de campagne et des financements politiques – or CNCCFP) released its findings for the 12 candidates who ran in the April 2022 presidential campaign. 

All of the candidates had their accounts approved, but 11 out of the 12 were refused reimbursement on certain items. Here are some of the items that did not get CNCCFP approval;

Rugby tickets 

Jean Lassalle – the wildcard ‘pro farmer’ candidate who received about three percent of votes cast in the first round of the 2022 election – bought “19 tickets to attend a rugby match” according to the CNCCFP’s findings. The organisation said it would not be reimbursing the tickets and questioned “the electoral nature of the event”. 

The total cost of the tickets was €465 (or €24.50 each).

Too many coffees

Socialist candidate, and current mayor of Paris, Anne Hidalgo reportedly spent at least €1,600 on coffee for her team during the campaign.

According to the CNCCFP, however, the caffeine needed to keep a presidential campaign running did not qualify under the country’s strict campaign financing rules.

Too many stickers

Hard-left candidate Jean-Luc Mélenchon’s was told that the 1.2 million stickers that were bought – to the tune of €28,875 – to advertise the campaign would not be reimbursed. Mélenchon justified the purchasing of the stickers – saying that in the vast majority of cases they were used to build up visibility for campaign events, but CNCCFP ruled that “such a large number” was not justified. 

Mélenchon was not the only one to get in trouble for his signage. Extreme-right candidate Éric Zemmour was accused of having put up over 10,000 posters outside official places reserved for signage. The same went for the far-right’s Marine Le Pen, who decided to appeal the CNCCFP’s decision not to reimburse €300,000 spent on putting posters of her face with the phrase “M la France” on 12 campaign buses.

Poster pictures

Emmanuel Macron – who won re-election in 2022 – will not be reimbursed for the €30,000 spent on a professional photographer Soazig de la Moissonière, who works as his official photographer and took the picture for his campaign poster. 

The CNCCFP said that Macron’s team had “not sufficiently justified” the expenditure.

Expensive Airbnbs

Green party member Yannick Jadot reportedly spent €6,048 on Airbnbs in the city of Paris for some of his campaign employees – an expense that the CNCCFP said that public funds would not cover.

Translating posters

The campaign finance body also refused to reimburse the Mélenchon campaign’s decision to translate its programme into several foreign languages at a cost of €5,398.

The CNCCFP said that they did not consider the translations to be “an expense specifically intended to obtain votes” in a French election.

Best and worst in class

The extreme-right pundit Zemmour had the largest amount of money not reimbursed. Zemmour created a campaign video that used film clips and historic news footage without permission and also appeared on CNews without declaring his candidacy – because of these two offences, CNCCFP has reduced his reimbursement by €200,000. He has been hit with a separate bill of €70,000 after he was found guilty of copyright infringement over the campaign video. 

The star pupil was Nathalie Arthaud, high-school teacher and candidate for the far-left Lutte Ouvriere party, who apparently had “completely clean accounts”. A CNCCFP spokesperson told Le Parisien that if all candidate accounts were like Arthauds’, then “we would be unemployed”.

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