To protect itself in the event of default by the borrower, the lending bank always asks for financial guarantees, such as a mortgage. Operation, cost, risks ... everything you need to know about the mortgage guarantee.
The mortgage, how does it work ?
The loan guarantee is the legal means that allows the lending bank to protect itself against the risk of default by the mortgage borrower. It involves mortgaging real estate owned by the borrower. It can be carried out on the property directly concerned by the loan granted or on another property owned by the borrower. In some cases, the mortgage may concern several properties. If the borrower can no longer meet his repayments, the lender (the bank) has the option of seizing the mortgaged property and selling it to recover the loaned capital. The seizure may not exceed the value of the property in question and may not affect the income or other property of the borrower. The mortgage guarantee is drawn up in the form of an authentic deed before a notary and is registered with the Land Registry Office.
What is the cost of a mortgage ?
When signing the notarial deed, the real estate borrower must pay mortgage fees, which will then be paid (in part) by the notary to the land registration service and to the public treasury. Mortgage fees are calculated based on the loan amount secured by the mortgage and represent approximately 1.5-2% of that amount. These costs consist of the land registration tax (approximately 0.7% of the loan), disbursements, the property security contribution (0.10% of the sale price with a minimum of €15), notary fees, the cost of research mortgages statements and 20% VAT. Regarding fees, be aware that the notary cannot set his rates freely, he must follow a scale set up directly by the State.