Mortgage and Mortgage: Amount, Calculation and Operation
January 30, 2019
The mortgage loan can be accompanied by guarantees among which we find the mortgage . In this case, the lender’s guarantee will cover the real estate which he can orchestrate the seizure and auction in the event of default by the borrower. It will be thus that he will obtain the repayment of his debt .
- 1 How the mortgage works
- 2 Benefits of the mortgage
- 3 Amount and calculation of the mortgage
- 3.1 The release of the mortgage
- 4 In brief
How the mortgage works
It should be known that the mortgage can either concern a real estate property of which the borrower is already owner or the property that he plans to acquire on the basis of the mortgage.
In this way, the bank benefits from guarantees on the money it lends by obtaining the seizure and sale of the property to recover its money in case of default of the borrower, that is to say in the hypothesis where he does not pay his monthly payments on time.
The implementation of the mortgage involves first a formal notice to pay addressed to the borrower. Failing to execute, he will lose the property of his real estate mortgaged.
The constitution of mortgage is a process that is necessarily before a notary and is followed by a publication in the mortgage conservation today called the services of land registration .
The interest of this publication is to allow any interested person to inquire at any public finance center of the situation of a given property including the possible existence of a mortgage that strike this property.
The mortgage is meant to last as long as the mortgage exists. It will still be registered in the land advertisement one year after the expiry of the loan without this registration can not exceed 50 years unless you proceed to the lifting of the mortgage , a process subject to certain conditions.
Thus, the mortgage ensures that the housing acquired through the real estate credit guarantees by itself the loan made with the bank. It may also be built on a property whose borrower is already owner.
You should also know that the mortgage does not prevent the borrower to proceed with the sale of his property how much he would not have finished repaying his loan.
He is then offered two possibilities, the first being to make an early repayment of the capital remaining due to the bank. The latter will then attest to the discharge of the debt.
The ensuing legal act will then constitute what is called a mortgage release, an act that entails the payment of certain costs charged to the borrower.
The second possibility for the borrower to apply for the transfer of the mortgage attached to the property sold to another credit.
It is the assumption of the sale of the original real estate for the acquisition of another which will be financed by a renegotiated credit and to which the mortgage will be attached. This solution has the merit of returning more often cheaper than the lifting of the mortgage with the constitution of a new guarantee.
Benefits of the mortgage
First, the mortgage has the advantage of being a guarantee à la carte in the sense that it is largely adaptable according to the needs of the contracting parties. If the borrower is unable to offer other guarantees, the mortgage is often a strong argument that tilts the balance in favor of the loan application file.
The mortgage is in any case a guarantee system open to all profiles, whether employees, entrepreneurs, entrepreneurs, retirees … and this, regardless of their socio-professional categories.
The mortgage, because of the solemnity of its implementation procedure is also a reliable and solid security.
Thanks to the mortgage, even the elderly can consider making a mortgage loan as an alternative solution for those who are not eligible for conventional loans but who have real estate to offer as collateral.
While the bank often prefers other guarantees such as bonding because of the speed of execution in the event of default by the borrower, the mortgage remains far more accessible and can guarantee many loans in addition to the mortgage.
Amount and calculation of the mortgage
The constitution of mortgage carries for the borrower a certain number of expenses among which one will mention the expenses of advertising real estate as well as the notary’s fees calculated on the base of the amount of the mortgage loan, but also the VAT, the tax attached to the land registration, registration fees …
The costs of registering the mortgage will tend to decrease as the loan amount increases. This is due to the existence of fixed costs in the list of previously mentioned costs. These are therefore decreasing costs.
Take the case of a loan with mortgage contracted in 2017. For 40 000 euros borrowed, the mortgage fees represent 2.09% of this amount while they are 1.29% for a loan amounting to 250 000 euros.
If the mortgage-backed mortgage is an agreed loan , the mortgage origination fee will be further reduced as this type of loan is most often exempt from financial advertising tax if it is not reduced fees.
A mortgage constitution also implies for the borrower to pay a particular fee, the real estate security contribution paid at the time of registration of the instrument constituting the mortgage.
This is an amount that is also calculated on the basis of the amount borrowed at a rate of 0.05% plus a further 20% with a minimum amount of 8 euros.
Release of the mortgage
As mentioned above, the mortgage remains registered 1 year after the normal expiration of the mortgage.
Thus, an early repayment of your mortgage will require you to go through the lifting of the mortgage so that his registration is written off and in the eyes of third parties, your credit has been refunded.
The costs associated with this release are based on the initial loan amount. They generally represent 1% and 2% of the capital remaining to be repaid to the bank.
For example, an amount of € 100,000 borrowed towards the end of 2017 resulted in a 0.65% release fee.
For property that is sold less than one year after the end of the loan that he has secured by means of a mortgage, the release is however unnecessary, the notary generally accepting a simple certificate of the part of the lending bank.
It must also be known that the release of the mortgage can be done either by amicable agreement between the bank and the borrower or by judicial decision.
In the first case, the notary will serve the notice to the land registry services in the form of an authentic deed. The judicial decision intervenes in the absence of agreement between the parties.
The district court will then be the competent court to request this lifting. The reason for the request must be either the termination of the loan secured by the mortgage or the expiry of the term of the mortgage provided for in the loan agreement.
From all the above, it can be concluded that the mortgage is one of the oldest guarantees in the context of a home loan. The existence of other guarantees considered to be less expensive, notably the bond or the lender’s privilege, has meant that only about 12% of the borrowers make use of this guarantee.
However, it has survived more than 3 centuries in particular because it is the only solution when there is no other alternative to guarantee a mortgage. Thus, if it is expensive and burdensome in terms of procedure, it is still a way for accessibility to a mortgage.
A mortgage with a real estate security interest that is the mortgage does not exclude the possibility of early repayment. It should be noted that each bank will set its own terms as part of the mortgage. It remains important to make comparisons before opting for a particular bank.
Appealing to a real estate loan professional comes as the best way to take out a home loan secured by a mortgage in the best conditions especially that it is a significant commitment to the extent that the risk of losing your property real estate remains in default of payment.
It will help you find and choose the cheapest loan while ensuring that it is a loan whose repayment is within your means.