A mortgage loan is a loan granted by a bank to finance a property or a project and backed by a mortgage on one or more properties held by the borrower. To guarantee himself, the lender has the right to seize the property if the borrower defaults on the repayment of his installments. This only occurs as a last resort, the bank favoring amicable solutions such as a spreading of the reimbursement.
The mortgage:
- requires the payment of mortgage fees at its establishment
- is of the same duration of the loan (extinguishes automatically one year after total repayment of the loan)
- can last up to 50 years.
- can also be lifted at any time, for example during the sale of the property which has been the subject of the credit, subject to a release fee.
The amount of the mortgage loan is generally between 70 and 80% of the value of the mortgaged property.
Who is he talking to?
To obtain a mortgage loan, you must be a French tax resident and already own one or more properties in France. Indeed, they are the ones who will serve as collateral for the lender.
The mortgage loan can be used in different cases:
- to acquire real estate when the traditional mortgage is not possible, for example, to buy abroad or if you are senior;
- to restructure or redeem your current credits;
- to obtain cash (like a consumer loan).
What are the advantages of a mortgage loan?
The advantages for the borrower:
- Benefit from a higher debt capacity, since the amount of the loan depends on the value of the mortgaged property. It is also possible to mortgage several properties.
- The mortgage loan can be taken out for any type of purchase, whether it is real estate or consumer goods.
- A longer repayment term, up to 30 years.
- The possibility of prepayment.
What are the disadvantages of a mortgage loan?
Using a mortgage is also not without risks:
- Taking out a mortgage on the property requires incompressible costs (notary’s fees for drafting the deed, compulsory land advertising tax, curator’s salary, ancillary costs corresponding to the mortgage slips, enforceable copies, and other official documents).
- When the repayment of the loan is completed in advance, it is necessary to proceed with the release of the mortgage, which also entails costs.
- Above all, in the event of default on the repayment of the loan installments, you risk, as a last resort, losing your property, since it will be seized by the lender and sold for his benefit.
If you sell the property before the end of the loan, you will also have to add release costs, unless the sale takes place more than a year after the last due date of the loan.
How to set up a mortgage?
The mortgage requires you to complete a few formalities, which are essentially there to protect third parties and creditors. Indeed, to be valid, it must be registered and published in the land registration service (formerly known as the mortgage conservation office). It is once these steps have been completed that the mortgage takes effect and is enforceable against third parties. The registration also determines the rank of the creditors for the allocation of the sale price, in the event of resale seizure. It can be granted for a maximum period of 50 years.
The whole procedure must take place before a notary, a key player in the real estate transaction. He will be responsible for registering and advertising the mortgage.
