Repayment deferral (grace period)
A period at the start of a loan during which the borrower repays little or no principal. Under a partial deferral they pay only interest and insurance; under a total deferral nothing is due and interest is capitalized. Useful for off-plan purchases or construction, until the property is delivered.
Key points
- Initial loan period during which all or part of the principal is not repaid.
- Partial deferral: only interest and insurance are due each month.
- Total deferral: no payment is made; unpaid interest is added to the principal.
- Common in off-plan or construction purchases to cover the delivery delay.
Frequently asked questions
What is the difference between a partial and a total deferral?
In a partial deferral, the borrower pays monthly interest and insurance, keeping the original principal constant. In a total deferral, nothing is paid and accrued interest is added to the principal, increasing the actual debt even before repayment begins. A total deferral therefore costs more over the total term.
Does a repayment deferral affect the APR?
Yes, the APR incorporates all cash flows over the entire loan term, including interim interest paid during the deferral. A total deferral effectively extends the actual term and increases the overall cost, which is reflected in a higher APR than a standard loan with otherwise identical conditions.
When should a broker recommend a repayment deferral?
It makes sense whenever there is a gap between the moment the financing is set up and when the property is delivered or let. It avoids the borrower simultaneously bearing a residual rent and a full installment. The broker must however clearly explain the extra cost incurred.
In practice
A couple buys an off-plan apartment to be delivered in 18 months; the bank grants an 18-month partial deferral during which they pay only interim interest (around €350/month) instead of a full amortizing installment (around €900/month), giving them room to keep paying their current rent.
Official sources
- Obtaining a mortgage loan · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr