The establishment of a mortgage generally requires a financial guarantee from the borrower. This guarantee will then generate additional costs which will be added to your borrowed capital. We do not always think of the financial guarantee, however, when it is required by the bank and influences the realization of your project. What is the financial guarantee used for? how much does it cost? The answers here.
The guarantee of a mortgage is one more way for the bank to protect itself against the insolvency of its borrower. Thus, after having studied his file meticulously, after having required the payment of a contribution and the subscription of a loan insurance, the bank will also ask his interlocutor to provide a financial guarantee. In the event of default on the repayment of the debt, the guarantee will be able to ensure repayment in place of the borrower. However, the mortgage guarantee should not be confused with loan insurance. The purpose of the insurance is to cover the loan only in the event of death, invalidity or permanent incapacity.
There are 3 ways to guarantee a mortgage, so as to ensure payment of the remaining amount due in the event of default by the borrower. On the one hand, we find the deposit which is the most requested these days. The surety uses a surety company to which the borrower will pay a certain amount of money. In exchange, the company guarantees its client for the duration of the loan. These organizations are generally affiliated with financial institutions or mutual insurance companies. Easy to set up and quick, the guarantee by a specialized company does not require the intervention of a notary. On the other hand, there is the mortgage guarantee.
This consists of putting the property at the origin of the mortgage into a mortgage. Thus, in the event of default, the bank will be able to sell the property in order to recover its capital. In this case, the intervention of a notary is required, which constitutes additional costs. The third guarantee is not a financial guarantee in itself. It is rather a privilege of lender of money which gives the bank priority over all the creditors of its borrower in the event of seizure and sale of the property subject to real estate financing.
The costs for which the borrower is responsible depend on the guarantee chosen for his mortgage. In the case of the mortgage guarantee, he will have to pay the land registration tax, the amount of which amounts to 0.7% of the total amount of the debt including the borrowed capital and interest. In addition, he will also have to take charge of the property security contribution, the notary's fees, disbursements and VAT. The mortgage guarantee turns out to be the most expensive of the three types of guarantees. The privilege of the money lender, for example, only counts the cost of registration. If you want to know the exact amount you have to pay, it is possible to request it from a notary. With regard to the surety by a specialized company, the costs include the commission paid to the surety organization as well as the payment to the mutual guarantee fund. Note that this last financial guarantee is able to reimburse you part of your contribution to the mutual guarantee fund once you have paid off all your debt.
Apart from the guarantee costs on the mortgage, you will also have to pay other costs such as the interest rate which represents the cost of financing, the administrative costs as well as the borrower's insurance.
