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To protect itself in the event of default by the borrower, the lending bank always asks for financial guarantees, such as the mortgage. Operation, cost, risks… everything you need to know about mortgage guarantee.

The mortgage, how does it work?

The mortgage guarantee is the legal means which allows the lending bank to protect itself against the risk of default of the mortgage borrower. It consists in mortgaging real estate owned by the borrower. It can be carried out on the property directly concerned by the loan granted or on another property owned by the borrower. In some cases, the mortgage may concern several properties.

If the borrower can no longer meet his repayments, the lender (the bank) has the possibility of seizing the mortgaged property and selling it to recover the loaned capital. The seizure may not exceed the value of the property in question and may not affect the income or other property of the borrower. The mortgage guarantee is drawn up in the form of an authentic deed before a notary and is registered with the Land Advertising office.

Note that if the mortgage borrower can choose the guarantee he wants (bond, mortgage…), the bank can require a mortgage guarantee if it considers that the loan is too risky.


What is the cost of a mortgage?

When signing the notarial deed , the real estate borrower must pay mortgage fees , which will then be paid (in part) by the notary to the land registry service and to the Public Treasury. Mortgage fees are calculated relative to the loan amount secured by the mortgage and represent approximately 1.5-2% of it.

These costs consist of the land registration tax (approximately 0.7% of the loan), disbursements, the property security contribution (0.10% of the sale price with a minimum of € 15), notary fees. , the cost of researching mortgage statements and 20% VAT.

With regard to emoluments, be aware that the notary cannot set his rates freely, he must follow a scale set up directly by the State. Thus, the emoluments represent 1.333% of a loan between 0 and 6,500 euros, 0.55% of a loan between 6,501 and 17,000 euros, 0.366% of a loan between 17,001 and 30,000 euros. and 0.275% of a loan included above 30,001 euros.

What are the risks of the mortgage?

The mortgage is an advantageous guarantee, both for the lending bank and for the borrower. In particular, it allows the borrower to obtain a mortgage without having to follow too complicated procedures. Unlike a mortgage guaranteed by a surety, in the context of a loan with mortgage guarantee, the borrower runs the risk of being dispossessed of his real estate if he does not honor his commitments.

In the event of default on his part, the property concerned will be seized and sold to reimburse the outstanding capital. The borrower should therefore always expect this eventuality. As seen above, the mortgage also has a certain cost for the borrower. The amount payable represents 2% of the loan amount.

Another risk, if the sums due to the lender exceeds the value of the mortgaged property, even once it has been sold, the borrower will still owe a debt to the bank. But this scenario is rare because the lending bank must normally ensure beforehand that the mortgage margin is sufficient.

How to raise a mortgage?

To be able to cancel the mortgage on his property, the real estate borrower must meet the deadline to repay his credit. In theory, a mortgage automatically ends 1 year after the last repayment term of the loan it guarantees. But if the owner sells his property before the end of his loan repayment or if he manages to repay his debt early, he can ask the lender to release the mortgage .

He will still have to pay the costs generated by this release (the release costs). These fees depend on the value of the initial loan: they represent between 0.7% and 0.8% of its value. They include the notary’s fees and VAT, the property security contribution, registration fees and administrative costs. Note that the release fees will not be payable by the debtor (the mortgage borrower) if it occurs more than a year after the end of the loan.

The lifting of the mortgage makes it possible to delete the registration of the mortgage from the file of the land registry service.


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