What is the mortgage guarantee of a loan?

What is the mortgage guarantee of a loan?

The mortgage is a provision affixed to home loans as security for the creditor in the event of non-repayment of the credit by the individual. It assumes that the bank can seize the borrower’s real estate to reimburse itself in the event of the latter’s financial default. If the presence of the mortgage as a guarantee is not systematic, you may well have to resort to it to obtain a loan.

The seizure of the property by the bank occurs in the event of non-payment within the deadlines of the monthly repayments of the loan contracted. The credit institution will send a formal notice to the borrower and, if he does not comply with the request, will take possession of the accommodation.

Depending on the financial institutions, other guarantees may be requested, less restrictive than the mortgage. Our tool presents the different loan terms required by the main financial institutions on the market. Rates, application fees, guarantee conditions: find the best offer for your loan!

What are the terms of the mortgage loan?

The loan accompanied by a mortgage is subject to the application of specific terms, for the borrower as well as for the credit institution.

A mortgage loan, who is it for?

The mortgage is in theory accessible by any individual, with more or less difficult depending on the profile and the guarantees presented. The mortgage loan is available to the greatest number, whatever the socio-professional category, from the moment the borrower has real estate to present as mortgage security.

In particular, it is possible to cite:

  • The employees
  • business leaders
  • Craftsmen
  • Retirees
  • Traders

You must inquire on your side to find out if you can claim to obtain a mortgage loan. The only major conditions applicable are to have tax residence and to pay taxes in France.

What are the characteristics of a mortgage loan?

The mortgage loan remains overall a classic mortgage loan: the presence of the mortgage does not call into question most of the terms associated with it. It is simply an additional guarantee that will have the effect of making it easier to access the desired credit. The relevant terms may then be as follows:

  • A fixed mortgage rate
  • A credit period of several decades
  • An amount intended to finance between 50% and 70% of the project: the rest can be financed by additional loans or the personal contribution of the borrower
  • The possibility of prepaying all or part of the credit, respecting specific rules.

Each bank will be able to set its own terms: it is then necessary to choose the best credit according to your needs and your budget.

What are the advantages of the mortgage guarantee?

The presence of a guarantee such as a mortgage reassures credit institutions; the fact of being able to proceed to the seizure of the property constitutes a determining factor in the granting of the loan. In fact, access to mortgage credit is easier than obtaining a loan without this guarantee. This is particularly the case for the elderly, for whom banks are generally reluctant to grant long-term credit, as well as for people who have not been able to take out a conventional loan.

Moreover, the mortgage loan makes it possible not to pay insurance interest, the presence of the mortgage constituting a sufficient guarantee for the banks. In addition, the repayment of the mortgage loan can be done “in fine”; this means that the borrower will only repay the interest on the credit during the term (for a maximum period of 15 years). He can then start to amortize the loan at the end of the allocated credit.

How to mortgage property?

The mortgage falls within a well-established legal framework: it must be carried out in the presence of a notary, who will take care of publishing it to the land registration services. The publication in question attests to the effective mortgage of the property concerned. Each individual can request from a public finance center the situation of a property to know the specifics.

In addition, the housing concerned by the mortgage can be a property that the borrower currently owns or housing under construction.

How long is the mortgage for a loan?

The guarantee present in the exercise of a mortgage loan is applicable throughout the duration of the mortgage granted. This means that the credit institution will be able to seize the property even a few months before the end date of the repayments. The duration of the mortgage even runs for one year after the effective end of the repayment of the outstanding capital.

All in all, the mortgage guarantee may have a maximum duration of 50 years. It turns out that some credits assume such a long repayment period. However, it is possible to lift the mortgage on a property, under certain conditions, in particular in the event of the sale of the property before the end of the loan.

How is the lifting of the mortgage going?

The lifting of the mortgage consists of freeing one’s property from the “threat” of seizure concerning it. It can be done in two ways:

  • By amicable agreement: the borrower and the bank can reach an agreement to decide on the lifting of the mortgage concerning a property. However, this may involve additional costs, which remain the responsibility of the borrower. Furthermore, the lifting of the mortgage must be notified by authentic deed drawn up by a notary;
  • By court order: if it is impossible to find an amicable agreement (refusal of the waiver by the credit institution), the borrower can contact the competent TGI (Tribunal de Grande Instance) to request the waiver of his mortgage. It must nevertheless be in one of the following two cases: extinction of the debt (total repayment made) or extinction of the mortgage (end of the duration provided for by the credit).

In the event of total early repayment, specific costs are applied by the bank, which will no longer be able to benefit from the interest rates provided 

What is the cost of mortgaging a property?

The costs of the mortgage real estate loan guarantee are multiple and must be taken into consideration by the borrower before taking out any real estate loan. First, credit-related charges apply: these are interest rates or early repayment penalties. To these costs must be added several additional costs, which are called acquisition costs:

  • Notary fees: they are set by decree and remain the responsibility of the borrower
  • The corresponding taxes
  • Related taxes
  • Mortgage costs themselves

Namely: the mortgage as a guarantee of the mortgage, therefore, allows easier access to the desired loan. The creditor may even sometimes require the inclusion of this guarantee in the loan, in order to secure the sum of money released in return. It is important for the borrower to check the terms of the mortgage carefully because it commits him to sell the property for which he will have invested so much in the event of default.

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By Michael Caine

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