Guarantees of a loan
For a real estate loan
Banks will demand a loan guarantee from the borrower in case of default by the borrower. The choice of the guarantee determines the cost.
On the other hand, this choice will have consequences if you were no longer able to repay your loan.
The different types of guarantee
For a mortgage, there are 4 types of guarantees
The mortgage is the best known loan guarantee but it is less and less used. Binding and relatively expensive, it serves to guarantee the payment of a debt contracted on new or old real estate. The lender can seize and sell property through the courts.
The mortgage fees represent about 2% of the loan amount (land registration tax 0.615% of the loan amount and registration fees at the Mortgage Office). The cost of the mortgage is relatively high.
The mortgage is the subject of a notarial act. The registration is made at the Mortgage Office of the place where the property is located.
Registration as a lender of money
Privilege listing of Denier de Deniers is a guarantee only for old properties. The IPPD is cheaper than the mortgage (no registration fees and no property tax).
Close to the mortgage, this guarantee is taken in favor of the borrower. It therefore applies only to existing goods and therefore can not be used for off-plan sales or for the construction of a single-family home.
Like the mortgage, the Denominator’s Privilege Listing must be the subject of a notarial deed and must be registered with Mortgage Retention within 2 months of the sale .
The Denominator’s Privilege listing ranks on the date of sale, which means that it will have priority over all other guarantees taken on the property .
In the event of a financial problem, the operation of the Denominator Privilege Registration will be identical to that of the mortgage, that is to say, seizure and sale of the property by judicial means.
The surety company
Banks have created surety companies to reduce the collateral fee for individuals (no mortgage registration fees, no notary fees).
It is important to note that this type of guarantee is advantageous for customers and also profitable for banks. The surety company undertakes to replace the debtor in the event of default.
In return, the borrower must pay the bonding company, as soon as the funds are released, a contribution proportional to the amount of its loan, composed of:
- From a contribution to a mutual guarantee fund which could sometimes be partly paid back to him at the end of his credit if there were no problem
- From a commission, which is definitely acquired by the surety agency.
Unlike the mortgage, the guarantor has the advantage of not requiring a release since it is a private deed that has no particular legal formalism. This advantage is particularly important in case of change of housing.
The bond “Mutual official”
This is a particularly good guarantee for civil servants.
Only civil servants (National Education, Treasury, PTT, Atomic Energy, Police, Justice …) and certain particular activities can benefit from it. The best known of these guarantees is the guarantee acquisition of the MGEN which allows the employees of the National Education to benefit from a guarantee without expenses.
Guarantees on the professional loan
The guarantees required for a professional credit meet other criteria and correspond to a double requirement on the part of the banks.
- The good health of the company (debt ratio, accounting result, order form …)
- The financial position of the manager (assets, debt, bookkeeping).