In order to protect itself when it lends money to finance real estate, the bank takes various guarantees. It firstly requires the borrower, in the general case, to take out insurance that will allow him to be reimbursed anyway if he dies or experiences serious health problems, preventing him from working – this is is borrower insurance.
But other difficulties, such as the loss of a job or a divorce, which can lead to a default, the bank takes additional guarantees. The best known to the general public is the mortgage. Its image is however sulphurous, because it allows the bank to seize the property and sell it for its profit, if necessary.
In practice, the mortgage must be registered by a notary with the land registry services. It may relate to the property being purchased or to another accommodation already owned by the borrower.
Priority compensation
The bank has other solutions to guarantee the loan, such as the device of the “privilege of lender of money” (PPD), a device similar to the mortgage which will allow it, too, to seize the property in the event of default. of payment. But here it will be compensated in priority over any other creditors. As with the mortgage, the intervention of a notary is compulsory. The PPD is often taken out for an investment in the old one, the mortgage for the new housing.
Note that for people with significant assets, the bank can use part of it to “collateralize” the credit. She may, for example, become a beneficiary of life insurance. However, this solution remains marginal.
The guarantee that banks use most frequently is in fact the surety – when the lending institution delegates the risk of default to a third party. It is the latter who will then take care of the monthly payments in case of concern, and will then turn against the borrower. This solution is preferred by banks, it avoids them having to seize the property to sell it then, with all the uncertainties and efforts that this represents.
“The borrower generally has no say in the guarantee taken out by the bank”, specifies Maëlle Bernier, spokesperson for the broker Meilleurtaux. However, this choice is not without incidence for the borrower and sometimes determines the obtaining of the credit: “Banks much prefer the surety, if the file is not accepted by the third party, it may happen that they refuse the loan”, indicates Mme Bernier.
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