How to help your child become an owner?

But because they could not bring in a sufficient amount of equity, the young woman’s parents agreed that a mortgage on their home would serve as collateral for the loan.

Why a guarantee?

“The bank’s main criterion is its repayment capacity. There are people who have their own funds, but it’s a bit tight. Or they have fixed-term contracts … or health problems that mean they can’t get life insurance“, Explains notary Renaud Grégoire.

What is a mortgage?

When you borrow money to buy a house, the house you buy is mortgaged. This loan acts as a guarantee to the bank for the repayment of the loan.

The mortgage does not expire overnight once the house is fully paid: it lasts 30 years… unless you choose to go to the notary to cancel the mortgage. What Marc Delforge, mortgage specialist at BNP Paribas Fortis does not particularly recommend. It can still be used: “If, for example, you have a fully paid 200,000 euro home mortgage and want to borrow 100,000 euro back, the mortgage on your home can again serve as a guarantee for the bank. And this without having to return. by the notary for the expenses related to the loan “.

Two mortgage files

In the case of our young wife, there are two mortgage houses to secure the same loan. In the event of non-payment, the bank reserves the right to sell the parental home after a series of legal remedies. “But the bank must comply with a series of procedures before arriving at the forced sale of a mortgaged property reassures Mr. Delforge: at the end of the 2nd month of delay, he must send a reminder letter. At the end of the 3rd month, the bad payer is registered with the National Bank (and he is forbidden from credits) There is conciliation, to try to recover the sums due … Often, in case of problems, the owner sells his house from him – even, to obtain a best price. But as a last resort, it’s forced sale. “

The problem with our young couple is that there are two houses under warranty. The bank chooses the solution that will allow it to recover the amount due and decides which property to offer for forced sale. So he can sell his parents’ one.

What if we borrow together?

Another avenue for parents who cannot give their child money is to become co-borrowers, up to 5-10% of the value of the home. A status that the banker and the notary undertake to advise against. “If one of the parents dies, this ownership stake will be part of the inheritance and will therefore be subject to inheritance tax,” explains Mr. Delforge.

The mortgage does not involve this complication in the event of death. Because more often than not, the widow or widower continues to occupy the house that serves as a guarantee for their children. And it can also request a release (mortgage release) from the bank.

And in the event of a young couple’s divorce, however, the mortgage is a complicating factor. If the young woman does not keep the house, the bank must agree to release her from the mortgage … and ask for a loan, she can also ask the bank to take out the mortgage on her parents’ house. Puzzles that generous parents would do without.