Loan smoothing / nested loans
A financial engineering technique combining multiple loan tranches of different durations (main loan, PTZ, Action Logement) to produce a single constant aggregate monthly payment throughout the project. The main loan adjusts its instalments to offset the other tranches' varying payments. Without smoothing, the combined raw instalments would frequently breach the HCSF debt-ratio ceiling.
Key points
- Essential when a PTZ or Action Logement loan is combined with the main mortgage.
- The main loan is adjusted at each step of the other tranches to keep the total instalment stable.
- Prevents breaching the HCSF debt-ratio ceiling (35% of net income) throughout the entire term.
- The broker models the smoothing on a spreadsheet or simulation tool before any bank submission.
Frequently asked questions
How does smoothing work in practice between a main loan and a PTZ?
During the PTZ deferral period (5 to 15 years depending on income), only the main loan is repaid. The main loan is sized so its instalment equals the target monthly payment. When the PTZ begins amortising, the main loan instalment is reduced by the same amount, keeping the combined total constant. This requires bespoke structuring that only credit simulation software or a dedicated spreadsheet can accurately calculate.
Is smoothing accepted by all banks?
No, not all banks offer smoothing or have expertise in this structure. Some banks refuse to smooth against a PTZ issued by another institution. The broker identifies lenders with the genuine capacity and willingness to incorporate smoothing in their offer, which is a decisive selection criterion for files involving multiple financing tranches.
What is the difference between smoothing and a stepped-payment loan?
Smoothing is a multi-tranche structuring technique where the main loan is adjusted to offset variations in other lines, maintaining a constant total instalment. A stepped-payment loan is a single loan whose instalment rises or falls on a contractually pre-set schedule, independently of any other financing lines. The two can coexist: a stepped-payment loan can itself be incorporated into a smoothed structure.
In practice
A buyer borrows €180,000 as a main loan over 25 years plus €40,000 as a PTZ over 20 years (with a 5-year deferral). Without smoothing, the raw combined instalment would be €1,100 during the 5-year deferral, then €1,380 once the PTZ starts amortising. With smoothing, the instalment stays constant at €1,100 throughout: the main loan is extended or adjusted accordingly.
Put it into practice with CourtImmo
See how CourtImmo software helps brokers on this topic:
Official sources
- Obtaining a mortgage loan · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr