A Plan d’Épargne Logement (PEL), or Housing Savings Plan, is a French savings scheme designed to encourage homeownership. It offers a guaranteed interest rate on savings and, more importantly, the potential to obtain a preferential mortgage rate for purchasing or renovating a primary residence. But exactly what can you finance with a PEL?

The primary purpose of a PEL is to secure a loan specifically for a real estate project. This encompasses several types of properties:

• Purchase of a Primary Residence: This is the most common use of a PEL loan. You can finance the acquisition of a house or apartment intended as your main home. This includes new constructions, existing properties, and off-plan purchases (VEFA).
• Construction of a Primary Residence: If you plan to build your own home, a PEL loan can help finance the construction costs.
• Extending or Improving a Primary Residence: Renovation projects, such as adding an extension, updating a kitchen, improving energy efficiency (insulation, new heating system), or adapting the property for accessibility, are eligible for PEL financing. Major renovations that significantly increase the living space or value of the property are generally favored.

It’s crucial to note that the property being financed must be your primary residence. This means you must live in the property for at least eight months of the year. Vacation homes, rental properties, or commercial properties are not eligible.

The PEL loan can be used to finance all or part of the project. The amount you can borrow depends on several factors, including:

• The total savings accumulated in the PEL: The more you’ve saved, the higher the potential loan amount.
• The interest earned on the savings: Accumulated interest also contributes to your borrowing power.
• The borrower’s repayment capacity: Banks will assess your income, debt, and overall financial situation to determine how much you can afford to repay.
• Prevailing interest rates: While the PEL loan offers a preferential rate, it will still be influenced by the general economic climate.

While the main focus is on primary residences, under certain conditions, it’s possible to transfer your PEL loan rights to a close family member (spouse, ascendants, or descendants) to help them finance their own primary residence. This can be a valuable option for assisting loved ones in achieving homeownership.

In summary, a PEL is primarily designed to finance the purchase, construction, or renovation of your main home. It’s a useful tool for long-term financial planning, offering a structured way to save and secure a favorable mortgage rate for your future housing needs. Understanding the eligible uses of the PEL loan ensures you can maximize its benefits when you’re ready to embark on your real estate project.