When taking out a mortgage with a lending institution, everyone is required to present a certain number of guarantees to the organization which agrees to pay the funds. These home loan guarantees will allow the bank to protect itself against the risks of non-payment of the credit. The IPPD, or privilege of money lender, is one of these guarantees from which the borrower can choose.
What is the lender privilege?
The privilege of lender of money works on the model of the mortgage guarantee. In the event of default by the borrower, in particular if he is unable to continue repaying his monthly mortgage payments, the IPPD authorizes the creditor (the bank) to seize the mortgaged property and put it at auction. The sum obtained will then allow him to recoup his costs.
The IPPD (registration in privilege of lender of money) is therefore one of the essential guarantees when a borrower wishes to obtain a large sum of money for the purchase of real estate.
Like the mortgage, the privilege of lender of money must be the subject of a notarial deed and be registered with the land registry services.
The peculiarity of the IPPD
Compared to the mortgage, the privilege of lender of money has a particularity, however. Indeed, this guarantee is generally only used in the case of existing real estate, namely:
- Old housing;
- New housing whose construction has been completed;
- A terrain.
In practice, it is therefore not possible to register in privilege as a lender of money for the acquisition of an individual house under construction or an apartment for sale. Also excluded: the financing of renovation or development work, and the obtaining of a bridging loan.
Any rule having its exceptions, it happens however that this particularity is not applied. The decision is at the discretion of the mortgage registrar.
Another specificity: the registration in privilege of lender of money is only possible once on the same property (when the mortgage can be doubled).
How much does it cost to register as a lender of lien?
Like the mortgage, the IPPD is subject to various costs:
- The notary’s fees;
- The real estate security contribution;
- Registration fees;
- VAT (in the case of new housing whose construction has been completed).
The good news is that the privilege of lender of money is exempt from the land registration tax. It follows that the IPPD is a guarantee more financially attractive than the conventional mortgage: count about 0.60% of the total amount, or $ 1,200 for $ 200,000 borrowed (against $ 3,000 on average for the mortgage) .
Please note: if you decide to repay your mortgage in advance, or if you sell the property while borrowing, you will have to unsubscribe the accommodation from the land registry services, in order to lift the lender’s privilege mechanism from funds. This operation is called the “release of mortgage” and involves additional costs (between 1 and 2% of the capital remaining due).