How does the Housing Savings Plan (PEL) work?

The Housing Savings Plan (PEL) is an excellent alternative when you want to obtain a mortgage. If you have the desire to subscribe to this savings plan, this article highlights how it works.

What is the ELP and what is it used for?

The Housing Savings Plan (PEL) is a savings account allowing any natural person to obtain a mortgage. Said credit is granted at a preferential rate thanks to the money saved and its activation is subject to a minimum savings period of 4 years. It is therefore not possible to apply for a loan before this period.

In addition, the borrower benefits from a state premium. The Housing Savings Plan therefore has two advantages. Also, the opening of the ELP can only be done once and a minimum initial payment of 225 euros is required.

What is the upper limit for a PEL?

The ceiling for the Home Savings Plan is actually set at € 61,200 excluding capitalized interest. However, there is a certain probability of an increase in this threshold which may well depend on the capital produced from interest after several years.

How many years can I keep my PEL?

Concretely, the duration of a Home Savings Plan is set in a range of 4 to 10 years. This means that at most, you will only be able to save for ten years. Since the minimum duration is 4 years, the PEL remains blocked during this period. During this time, you are able to save without any possibility of withdrawal.

Indeed, any withdrawal attempt results in a systematic closure of the ELP. However, once this period is over, you can now withdraw the amount saved to invest or decide to extend the PEL up to 10 years.

At the end of these 10 years, the ELP is definitively closed. You will therefore no longer be able to make savings. However, the ELP does not expire after the tenth anniversary. It continues to generate interest for a period of 5 years. The only concern is that you no longer have the right to borrow.

What is the remunerative rate of the Housing Savings Plan?

In general, the rate of remuneration is determined by contract since the opening date of the Housing Savings Plan. This rate remains the same until it is closed. Since August 1, 2016, the rate of remuneration of the PEL has been set at 1% gross. However, the Banque de France is able to revise this rate each year. This revision is made according to a mathematical formula which incorporates the swap rates at 2, 5 and 10 years.

Once revised, the publication of the new rate comes into effect no later than December 5 of the previous year. However, in certain exceptional cases, the Ministry of the Economy may decide to make a derogation from the fixing rule.

Would I be taxed on this savings?

In order to better answer this question, there is a condition to consider. It is that of the opening date of the ELP.

For a PEL opened before the date of January 1, 2018

Before the first 12 years, the income from the PEL is tax exempt. However, social security contributions of 17.2% are applied to them each year. These withdrawals are made during the opening and closing of the plan.

From the 12th year, interest on the ELP is now subject to a tax deduction at a rate of 30%. This is called “The flat tax”. It consists of income tax which is 12.8% and social security contributions which amount to 17.2%.

The flat tax is levied during the payment of interest. However, there are still some possibilities for exemption from the tax levy. The procedure must be submitted to the managing establishment of the PEL before November 30 of the year preceding the payment of interest.

Thus, it is necessary in a first case to make a declaration of fiscal income with a reference lower than 25,000 euros. You must be single, divorced or widowed at the time of the declaration. In a second case, it is necessary to make a declaration of fiscal income with a reference lower than 50,000 euros. This case takes into account taxpayers who are subject to common taxation.

For a PEL open from January 1, 2018

From the first year, the interest on the ELP is subject to the “flat tax” which constitutes the tax deduction of 30%. However, with the exception of an exemption, it is not applicable. In addition, during the declaration of income, there is the possibility of opting for taxation at the progressive scale.

How can I put money into my PEL, are there any limits?

Regarding the funding of the account, it is mandatory to make a payment set at an annual level of 540 euros. Either 45 euros per month or 135 euros per quarter or even 270 euros per semester. Indeed, the frequency of payment is optional. However, there is a limit of 61,200 euros which cannot be crossed except in possible exceptional cases.

Being a regulated savings product, with conditions governed by the public authorities, the PEL remains very reliable in terms of mortgage loans.

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