To grant a mortgage loan, a bank generally requires a guarantee. Among these guarantees is the mortgage.
#### Definition of Conventional Mortgage
The conventional mortgage is a financial guarantee required by the bank to secure repayment of a mortgage loan. It's called "conventional" because it's voluntarily consented to by the borrower. This mortgage applies to real property belonging to the borrower, whether an apartment, house, or land. It can also be established on the property acquired through the mortgage loan. A mortgage may be a mandatory condition for certain regulated loans, and banks systematically require a mortgage for no-deposit mortgage loans.
#### Note
- Other forms of guarantees also exist:
- Special legal mortgage of the money lender: replacing the money lender's privilege (PPD), this guarantee is granted by law for the acquisition of new or old real estate, but not for financing work or buying off-plan.
- Bank guarantee: a financial organization guarantees loan repayment to the bank in case of borrower default.
#### Mortgage Effects
The mortgage lasts as long as the loan and automatically expires one year after full credit repayment. However, its duration cannot exceed 50 years. It's possible to request mortgage release at any time, particularly when selling the mortgaged property. A mortgage transfer is also possible, allowing the mortgage to be transferred to a new property when reselling the initial property to acquire another. In case of non-repayment of the credit, the bank can seize and sell the mortgaged property to be repaid first from the sale proceeds. However, banks generally favor amicable solutions.
#### Mortgage Cost
- The cost of a mortgage is generally higher than that of a guarantee. The borrower must pay:
- Notary fees;
- Real estate security contribution;
- Land registration tax;
- Formality and disbursement fees.
These fees represent approximately 1.5% to 2% of the mortgage loan amount. Release fees are also expected. This is why a guarantee is often preferable if the borrower plans to resell the property before the end of the credit.
The mortgage is formalized by an authentic deed before a notary. The notary handles registration and publication at the land registry office, making the mortgage guarantee enforceable against third parties. The notary will also be best placed to advise you on choosing between a mortgage or a guarantee.
Keywords:
guarantee, bank loan, mortgage