Do you intend to take out a mortgage? Before the bank agrees to lend you the money, you’re going to have to show your feet – and use a loan guarantee. For the lending institution, this guarantee is a security: in the event of a problem in the repayment of the monthly payments, if for example you are no longer able to pay, the property you own will be used to settle your credit. The most common of these insurances is none other than the mortgage guarantee, or more simply the mortgage.
What is a mortgage guarantee?
The mortgage guarantee (like all other loan guarantees) allows the lending institution to protect itself against the risks of default by the borrower. If you should no longer be able to repay your monthly loan payments, for example as a result of a personal concern not covered by your credit insurance, the legal mechanism of the mortgage will give the bank the possibility of seizing the property and recover all or part of the funds paid. This is why home loan and mortgage are usually linked.
Mortgage collateral is the most common form of protection required by banks. Generally, it is used in the context of loans intended to finance real estate not yet built or under renovation: construction of a detached house, or even major development work. It is also a regularly preferred option when a borrower wishes to renegotiate his credit.
How does the mortgage work?
The principle of the mortgage guarantee is simple: if you can no longer pay your monthly mortgage payments, this mechanism authorizes the creditor to seize the mortgaged housing (the one you buy with the loan or any other property that you own) to sell it at auction. The proceeds of the sale are thus redistributed to the bank, which can cover its costs. But beware: if the financial transaction is not up to the amount that remains to be reimbursed, you will find yourself de facto in debt.
The mortgage is granted voluntarily by the borrower. It requires the establishment of a notarial deed, as well as registration with the land registry services (replacing the mortgage conservation office).
It runs for the entire duration of the mortgage, and remains registered with the land registry services one year after the end of the repayment (but not beyond 50 years).
How to control costs in the event of a mortgage and mortgage?
The costs of taking out a mortgage guarantee are payable by the borrower. These costs include:
- The notary’s fees;
- The land advertising tax;
- The real estate security contribution;
- VAT ;
- Registration fees.
Some of these fees are fixed, others are proportional. Therefore, the higher the amount borrowed, the lower the cost. Still count on an average of 1.5%, which means, for a home loan of $ 200,000, almost $ 3,000 to pay.
Note, however, that you can reduce these costs:
- By backing up approved loans (zero rate loan, PEL, PAS) with your loan, the notary’s fees will be lower, and the land advertising tax not collected.
- By playing on your borrower profile to negotiate these fees (or other ancillary fees, so as to balance your costs).
- By calling on a real estate broker to negotiate the most advantageous costs for you.
Finally, be aware that there are so-called “mortgage release” fees. They apply when you repay your credit in advance or when you sell your property before having settled the loan, for the establishment of a notarial deed which cancels the registration in mortgage guarantee.