Early repayment penalties in France (IRA): caps

The right to repay before the due date

Article L313-47 lays down the principle: “The borrower may always, on their own initiative, repay early, in part or in full” their mortgage. There are only two limits:

• the contract may prohibit partial repayments equal to or below 10% of the initial loan amount, unless it is the balance (art. L313-47);
• the contract may provide for a penalty, within the regulatory cap.

After receiving your request, the lender must provide you free of charge and without delay, on paper or another durable medium, with information setting out in figures the consequences of the early repayment (art. L313-47). The request is made in writing to the lender (service-public.gouv.fr, F1669).

The legal cap: two cumulative limits

The IRA is capped by article R313-25 of the Consumer Code. It may not exceed:

1. six months’ interest on the capital repaid, calculated at the loan’s average rate;
2. and in no case 3% of the capital outstanding before the repayment.

The lower of the two amounts applies.

Example: you repay in full an outstanding capital of €150,000, borrowed at 3.2%.

• 6 months’ interest: 150,000 × 3.2% ÷ 2 = €2,400.
• 3% of the capital outstanding: €4,500.
• Maximum IRA: €2,400.

With a loan at 7%, six months’ interest would amount to €5,250; the 3% cap, i.e. €4,500, would then take over.

Loans with different rates over different periods. Where the rate varies across repayment periods (for example a lower rate in the first years), the penalty may be increased by the amount allowing the lender to obtain, over the elapsed period, the average rate set when the loan was granted (art. R313-25, para. 2).

No other charges. Apart from this penalty, “no penalty or cost” may be charged to the borrower for early repayment (art. L313-49).

When no penalty is payable

Article L313-48 prohibits any IRA where the repayment is prompted by:

These exemptions apply even if the contract provides for a penalty. The ANIL (national housing information agency) specifies that they apply to loans taken out after 1 July 1999. Attach proof of the reason (employer’s certificate, redundancy letter) to your written request.

Negotiating the IRA

The law sets a cap, not a compulsory amount: it is the contract that does or does not provide for a penalty (“your contract may provide for penalties”, service-public.gouv.fr). The clause is therefore negotiated before signing the loan offer, like the rate or the insurance. The ANIL indeed recommends “taking into account the early repayment penalties provided for in the contract” before committing. The most common negotiating options:

• removing the clause altogether;
• an exemption on resale of the home, whatever the reason;
• an exemption for partial repayments funded from the borrower’s savings;
• an exemption after a certain number of years of repayment.

Once the offer has been accepted, the clause is binding; later renegotiation remains possible but depends solely on the lender’s agreement.

IRA, refinancing and resale

When the loan is refinanced (rachat de crédit) by another institution, the original loan is repaid early: you therefore pay the IRA provided for in the original contract, to which may be added mortgage release fees (frais de mainlevée d’hypothèque), the arrangement and guarantee fees of the new loan, and new insurance (service-public.gouv.fr, F146). This cost must be built into the calculation of whether it pays off: see our guides rachat de crédit (loan refinancing) and renégocier son prêt (renegotiating your mortgage).

On a sale without grounds for exemption, the IRA is added to the outstanding capital to be repaid. If the loan was secured by a hypothèque (mortgage charge), the release fees are added; to fund a purchase before the sale, see the prêt relais (bridging loan).

Which professional to consult

The courtier en crédit (mortgage broker) negotiates the IRA clause at the loan offer stage and calculates whether refinancing or renegotiation is worthwhile, penalties included. On a sale, the notaire (notary) identifies the charges registered against the property and arranges the release of the loan security; give them proof of any exemption.