Credit repurchase and mortgage guarantee: why, how?

For certain types of loan consolidations, financial institutions may require a mortgage guarantee to accept the refinancing application. How does this guarantee work? What is it for? What are the prices? What are the risks? Our explanations.

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What is a mortgage guarantee?

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The term “mortgage guarantee” designates the fact, for a financial organization, of “taking” real estate as collateral to grant a loan. In other words, by buying back mortgage loans, you are granting the refinancing organization rights over your property, rights that the organization can assert in the event of your default.

Mortgage guarantee and insurance: what differences?

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You can then ask yourself this question decently: why demand a mortgage guarantee if you take out insurance? Quite simply because the mortgage guarantee pledged during a loan buy-back as with a conventional mortgage, is requested for all default situations not covered by the insurance contract.

For example, if your borrower insurance (on which we explain everything in our post) does not cover defaults following an accident that occurred during the practice of an extreme sport (which is the case with most borrower insurance), then the mortgage guarantee will be requested.

Obviously, these cases are actually very rare and, statistically, there is little chance of having your property seized. It is nevertheless in theory possible and it is even exactly the principle of the repurchase of mortgage credits, like the traditional real estate loan with mortgage guarantee.

What is the mortgage guarantee used for when buying a loan?

Therefore, the mortgage rather acts as a psychological factor in your favor with the funding agencies. By agreeing to carry out a mortgage repurchase, not only do you send a signal to the organization saying “I am confident in my future ability to meet my repayment commitments” but in addition, you offer the banking organization a parachute in failure to be covered. Everyone wins.

Mortgage repurchase: higher amounts

Because by opting for the repurchase of mortgage credits, you offer yourself the possibility of gathering much larger sums than during a repurchase of conventional consumption credits, without mortgage guarantee. With Finance OR, the combined amount can amount to 90% of the value of the property you are putting into mortgage!

It is for this reason that the mortgage guarantee is generally chosen in the grouping of loans including a real estate loan: the property concerned by the real estate loan is put in mortgage to guarantee the regrouping.

Mortgage loan redemption: what costs?

Mortgaging a property has a cost insofar as the transaction must be carried out by a notary on the one hand and that on the other hand, certain taxes must be paid.

Thus, between the fees of the notary, the real estate security contribution and the registration fees, there must be an average of 1.5% of the amount of the mortgaged property.

To these costs, it is advisable to add the costs of the release of mortgage which will fall once the credit reimbursed to raise the mortgage.

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