Mortgage credit is credit secured by a mortgage. All types of credit can be secured by a mortgage: real estate credit, consumer credit, business credit, etc.
However, the use of a mortgage guarantee is only possible under certain conditions.
Mortgage credit: basic principles
A mortgage is a loan granted to a borrower with a property as collateral.
All types of loan can be backed by a mortgage.
A mortgage is a security interest. It enables the lender to guarantee repayment of the sums it gives to the borrower. As such, it can be used under a wide variety of conditions.
As a result, it is by no means limited to its most traditional use, home loans. On the contrary, it is very often used to secure business loans. Business borrowers, such as companies, do not always have substantial assets. And when they are just starting up, they may not have been in business long enough to reassure their creditors.
To break the deadlock, the lender can offer the business owner the chance to use his or her property as collateral. This becomes a three-way transaction: the bank (1) lends to a company (2), and the company director (3) becomes the mortgage guarantor.
This is sometimes the case with consumer credit. The borrower applying for a loan can pledge his or her assets as collateral, or his or her relatives can act as mortgage guarantors.
This solution is sometimes used by borrowers to obtain cash. Consumer credit is not an earmarked loan. The money is not given to the vendor (property loan), the craftsman (works loan), etc. It is made available directly to the borrower. It is made available directly to the borrower.
When is a mortgage possible?
Mortgages are available on two conditions:
- the borrower must have a property portfolio,
- the mortgage must have value.
The value of a mortgage depends on its ranking and the value of the property.
At the time of sale, the notary must pay the mortgage creditors in chronological order. The oldest creditor will be paid in full, then the next, and so on until the funds available are exhausted. If there is any money left over after all the creditors have been paid, it is returned to the vendor.
In theory, a first mortgage is therefore more valuable.
However, this is not a universal truth. When a property is very valuable, it can sometimes accommodate several mortgages. For example, a principal residence valued at 600,000 euros can easily accommodate several mortgages of 100,000 euros.
What recourse does a mortgagee have?
A lending institution can easily implement a foreclosure procedure when it benefits from a mortgage.
The publication of a mortgage requires the involvement of a notary. The notary will record the loan in a notarial deed. Authentic instruments are enforceable titles. As a result, they enable creditors to initiate recovery directly, without recourse to the courts.
Intervention by the judge remains possible, but at the stage of forced execution. The judge does not intervene upstream, to judge the existence of the claim and give an enforceable title to the creditor.
Frequently asked questions
How much does a mortgage cost?
The cost of a mortgage is approximately 1.5 % of the amount to be secured. It is made up of several taxes and the notary's fees.
Are there cheaper alternatives?
The lender can offer the borrower the option of using a surety company instead of a mortgage. However, there is a cost to using a guarantor. This cost is roughly equivalent to that of a mortgage.
Can you sell a mortgaged house?
It is possible to sell a house with a mortgage. However, certain conditions must be met. We have devoted a special publication to this subject, which we invite you to consult. visit.
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