Each guarantee has its own terms, both to limit the risk of default and to protect the borrower. Therefore, it is important to distinguish between those guarantees that allow both the bank and the borrower to take measured risks.
Loan guarantee fees: to limit the risk of default
The more the amounts become significant and the longer the durations, the more the bank takes risks when it makes a loan to an individual. To guard against non-repayment, it therefore requires a guarantee that will allow it to recover the sums lent in case of default of the borrower.
There are four types of guarantees:
- The Denier Lender Privilege (PPD): With a similar operation to the mortgage, the PPD allows the bank to require the seizure and sale of the property in case of non-payment of the purchaser. The bank then deducts the share of the outstanding capital on the total amount of the resale. This operation is exempt from the property tax, which reduces the cost.
- The mortgage: In case of unpaid bills, the bank may request the seizure and then the auction of the property to recover the sums advanced. Unlike the PPD, it is necessary to pay the land registration tax and registration fees to the mortgage office, which is a significant cost.
- Bail: In the event of default by the borrower, a specialized financial institution takes over. No registration fee is required since the deed does not need to be written by a notary. It is also possible for a natural person to stand surety, provided that his commitment is not disproportionate to his patrimony.
- Collateral: The borrower then chooses to guarantee its debt by pledging intangible property (business, shares, etc.).
Take into account the overall cost of credit
The cost of credit is not limited to the collateral costs taken by the lending bank (mortgage, surety, etc.) or those related to the borrower insurance. It also includes the booking fees, any penalties for early repayment as well as the broker’s commission if applicable.
Guarantees of borrower insurance: to protect the borrower
The borrower insurance is an additional security for the lending institution, but also and especially for the borrower.
Insuring your home loan can protect you and your family if you are no longer able to pay the monthly installments of your loan: your insurer then agrees to repay your lender in the event of death, or to take in charge of your deadlines in the event of disability, incapacity or even loss of employment.
Since the Lagarde law of 2010, the borrower is free to choose his borrower insurance, which he can subscribe in the context of a group contract (with his bank) or a delegation of insurance (with another insurer).
If the borrower has already taken out loan insurance, the Hamon Act of 2014 allows him to change loan insurance at any time during the first year of the contract. Beyond the first year, the Bourquin Amendment of 2017 allows this change on each anniversary of the signature of the loan offer.
Loan insurance and mortgage loan guarantee, two complementary coverages
The mortgage loan guarantee and the borrower insurance are complementary, insofar as they both make it possible to guarantee the solvency of the borrower to allow him to go to the end of his projects.
Real estate loan insurance offers great flexibility. It takes into account the profile of the borrower (age, occupation …) as well as the characteristics of the loan (duration, number of co-borrowers, etc.).
- The loan guarantee allows the lending institution to secure itself by giving it the certainty of being able to resell the property and recover the sums advanced.
- The borrower insurance provides insurance in the event of death, total incapacity for work, irreversible total loss of autonomy, total permanent disability and / or loss of employment. It thus protects the persons concerned and the lender who is assured of being reimbursed.
- These two coverages are complementary and have one purpose: to provide the necessary guarantees to enable future buyers to complete their real estate projects.