The mortgage loan guarantee is a mechanism put in place by all banks when granting a loan to purchase real estate. Both legal and commercial, this mechanism aims to protect the lending institution against credit risks: in the event of non-repayment of all or part of the loan by the subscriber, the bank can rely on this guarantee to recover what remains of the amount due.
Thus, the mortgage loan guarantee system is similar to a form of suretyship: in one way or another, this guarantee secures the lender by assuring him of being able to recover his stake if ever the borrower finds himself in payment default.
The subscription of a protection nevertheless causes mortgage guarantee costs that must be added to the total cost of the loan, in the same way as the borrower insurance .
- The different forms of guarantee
- There are several possibilities for a mortgage loan guarantee.
- The mortgage
Conventional system of mortgage loan guarantee, the mortgage backs the good payment of the debt to a property, without dispossessing the owner. In the event that you had to stop paying your monthly payments, the mortgage gives the bank (your creditor) the opportunity to seize the property in question and have it sold in court in order to recover all or part of its investment.
The mortgage is granted voluntarily by the borrower. It requires a deed to be signed before a notary as well as registration with the mortgage conservation office – today called “land registration services”.
IPPD
The IPPD is a home loan guarantee that works pretty much like a mortgage. From its full name Inscription en Privilège de Lenders de Deniers, the IPPD authorizes the bank to seize the property and have it sold in court in the event of non-repayment of the credit. Like the mortgage, it must be validated by a notarial deed and be registered in the mortgage file.
However, the IPPD has the advantage of requiring lower mortgage guarantee costs than for a conventional mortgage since there is no land registration tax.
On the other hand, this guarantee can only be taken on existing goods.
The surety company
It is possible to obtain a mortgage loan guarantee by presenting a bank guarantee . In concrete terms, it is an organization that replaces the lending institution so as to bear the risks of non-payment by the borrower. The surety company acts as guarantor for the bank, not for the subscriber, but it has many advantages for both parties.
In exchange for this guarantee, the borrower pays a contribution to a mutual guarantee fund which depends on the amount of the mortgage.
Joint surety
As part of the mortgage loan guarantee, the joint surety works in the same way as the guarantor for a consumer credit application: it is a natural person who stands surety for the borrower. The joint surety is however little used for a mortgage, except in the case of a loan made by a legal person, in which case all the partners who participate in the purchase of the real estate must agree to be surety.
The official deposit
The civil servant bond is a type of bond which, as its name suggests, is offered only to civil servants, as well as to certain specific professions (civil servants). In some cases, it waives all mortgage guarantee fees.
Reduce your home loan guarantee fees
Mortgage guarantee fees can weigh heavily on your budget, especially when you have to add them to other ancillary costs (application fees, cost of mortgage loan insurance, etc.).
Thus, the charges caused by the drafting of deeds before a notary concerning a mortgage loan guarantee (mortgage, IPPD) are the responsibility of the borrower, as are the costs of registration with the mortgage conservation office. Be careful, because these costs are not negligible: they can represent on average 2% of the amount borrowed!
For example, for a loan of €150,000, your costs may amount to:
Nearly €2,500 for the mortgage;
More than €1,000 for IPPD registration fees;
Nearly €2,000 for the deposit costs, knowing that part of this sum can be reimbursed by the guarantee organization (cost reduced by half).
To reduce these mortgage loan guarantee costs, it is therefore recommended to:
- Favor the surety option: surety by a specialized organization, which is increasingly practiced in the context of real estate loans, does not require the signing of an authentic deed at the notary’s and only incurs one-off costs, pay when the funds are released, for an amount that can range from €150 to €600 on average. To this, however, must be added a participation in the Mutual Guarantee Fund of 0.8% of the borrowed capital. At the end of the loan, if you have been a good borrower, the FMG can reimburse you for a substantial part of your costs.
- Use your borrower profile to negotiate either the mortgage guarantee fees or some of the ancillary costs (the result will always be the payment of a lower total sum). Use a simulator to evaluate all the pos.sibilities that will allow you to lower the total cost.
- Entrust the comparison of offers and the negotiation to a real estate broker, who will be able to find you the best borrowing conditions and a mortgage loan guarantee .Securing a mortgage guarantee provides financial stability, a critical step made more efficient with mortgage processing outsourcing. Leveraging expert services in this domain streamlines the complex procedures, ensuring accuracy and compliance. By mitigating risks and optimizing resources, outsourcing facilitates a smooth mortgage process, easing the burden on homeowners.
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