Caution or Mortgage – The Mortgage
Faced with the risk of unpaid borrowers, the bank can protect itself and demand guarantees. One of them, the mortgage, is used to guarantee the payment of a debt incurred on new or old real estate, without the owner being dispossessed of it.
But beware, to be fully in order, a “mortgage take-up” can only be done with the help of a notarized deed, which is registered with the Mortgage Office of the place where the property is located.
What are the formalism conditions? What is the precise operation of the mortgage and the associated costs? Here are the details of all you need to know before you commit.
According to the Civil Code, a mortgage is “real safety.” In practical terms, the lender (i.e. the bank) has with the mortgage a guarantee taken on a material property (the real estate) in case of default of the borrower (yourself). The accommodation itself guarantees the repayment of the loan to the bank and not a third party, as is the case with the bank guarantee.
In the case of a mortgage granted by the borrower as collateral to obtain a home loan, it is called a conventional mortgage. It is the result of an exchange with the banking body and is voluntarily consented. It is not a taxed mortgage.
Warning: the mortgage is not limited to a “simple” guarantee in case of non-payment of monthly payments. Taken from the property, the mortgage will have to be waived in case of early resale, while the credit is still in progress (see below “Mortgage-related fees”). The mortgage has by default a term equivalent to the term of the one-year home loan (within 50 years).
The role of the notary in the mortgage
A mortgage must be issued by a notarized deed. It is therefore impossible to use the mortgage as collateral for a real estate loan by disregarding the services of a notary. Its role is unavoidable and central. He must write the deed that authenticates and validates the mortgage taken.
In addition to his role as editor, the notary is at your side to inform you. They have an obligation to detail how the mortgage works by explaining the risks involved and the consequences you face in the event of a default.
The role of counsel of the notary takes on its full meaning here. It acts in your best interest and should help you make all your decisions in an informed way.
Once the mortgage is written and presented to the buyer has been validated, a mortgage must be entered into a mortgage retention file. It is up to the notary (or the bank) to carry out this registration.
The land advertising department will then check the regularity of the mortgage deed established before a notary to declare it compliant.
The rank of the mortgage takes effect on the date of registration.
The importance of the notary is clearly understood here in order for the security to be optimal and considered legally valid. Mortgage management is at the heart of the notary’s mission during a real estate sale. As a reminder, this one is there to guarantee the regularity of the real estate transaction, to take care of the formalities (including the mortgage) and finally unlock the borrowed funds.
The mortgage is a guarantee that entails a fee, simply called “mortgage fees.” The composition of these fees is as follows:
The property advertising tax. These are registration fees. The property advertising tax is 0.615% of the loan amount. This advertising service makes public all the formalities concerning real estate.
Stamp duty. It is also referred to as “ancillary fees” collected by the notary but then paid back (which are not part of his remuneration).
The contribution of real estate security. It replaces the compensation of the mortgage conservator once demanded. It represents 0.05% of the amount borrowed guarantees (with a minimum of 8 euros).
The notary’s emoluments: the notary’s remuneration is calculated according to a mandatory proportional scale. It is paid according to the price of the property, and the details are communicated by decree.
VAT (on the total benefit of the notary, not on the total cost of the property). Depending on the value of the property and the costs associated with the transaction, the cost of a mortgage can be between 1.5 and 2% of the home loan amount.
Good to know: by prepaying a home loan (thanks to a cash inflow or the resale of the property), you will have to proceed with a mortgage waiver. To collect the mortgage, the borrower will have to pay a release fee, which is therefore in addition to the overall cost of acquisition. Depending on the case, these fees can be between 0.8 and 1, or even rise beyond 2% of the remaining capital due. However, these additional costs are avoidable.
Indeed, there is an alternative to the payment of release fees: the transfer of mortgages. If you resell your property to buy a new one, you can ask the bank to transfer the mortgage and write it on the new property. The transfer of the mortgage avoids the costs of release, as well as the costs of building the new mortgage! However, the costs associated with writing the notarial deed will remain, but with a substantially reduced amount.
Mortgages are the most common form of collateral for a home loan. Often misunderstood and sometimes confused with the privilege of the moneylender (PPD) or with borrower insurance, it deserves your full attention.
Is it wise for your project? Can a bond be more economical depending on your strategy and your possible desire to resell in several years? The mortgage is still the most expensive guarantee and sometimes imposed by the bank to provide financing.
So don’t rush. By taking the time to compare the different warranty and financing solutions at your disposal, you can optimize the total cost of your home purchase and save money. Compare several offers of real estate credit by looking at the rate, the duration, the insurance… and guarantee!