To protect itself in the event of default by the borrower, the bank systematically requires a mortgage loan guarantee. However, the credit subscriber has the option of choosing between several guarantees. Among these, we find in particular the mortgage and the Privilege of Lender of Deniers commonly called PPD. Although having many common characteristics, they do not necessarily cover the same type of goods and do not represent the same cost. To help you see more clearly and choose the right cover for your situation, here is what to remember.
—
A compulsory choice to guarantee your loan
–
When taking out a mortgage, the bank requires the borrower to take out a guarantee to protect himself in the event of non-repayment of the credit. This is a complementary guarantee to the borrower insurance. There are several types of guarantees including the PPD (Privilege of Deniers Lenders) and the mortgage. One or the other of these guarantees is also compulsory in the event that you benefit from a social home loan exceeding € 15,000 or if you wish to obtain a bridging loan.
–
You can also choose the deposit via a surety body but if you are on this article it is because you have perhaps already ruled out this option or that the bank has refused you this one.
—
What you need to know about these guarantees
–
The PPD and the mortgage are two guarantees that have many points in common.
Functioning
The PPD guarantees and the mortgage make it possible in either case to cover the property that is the subject of the loan. This means that in the event of default by the borrower, the bank will be able to seize the property and sell it in order to repay itself.
Legally speaking, it is a “real security” that the lender takes in return for the loan it grants you. We are also talking about real guarantees.
–
Both the PPD or the mortgage must be drawn up by a notary. The cost of this legal act is always the responsibility of the borrower.
—
Advantages
Mortgage and PPD enjoy a good reputation with banking organizations. In addition, it is much easier to take out a mortgage guarantee or a PPD guarantee than a surety. Indeed, mutual guarantee companies can refuse to guarantee the mortgage of a borrower if his file does not meet all the required criteria.
Note also that the mortgage and the PPD make it possible to guarantee a zero rate loan (PTZ) if this is associated with a social home loan (PAS). This is not the case if you opt for a deposit.
Disadvantages
The mortgage and the PPD must be established by a notary, which generates significant additional costs compared to the surety bond. If we add the fees related to land registration for the mortgage, this generally represents the equivalent of 1.5% of the amount of the loan.
The mortgage and to a lesser extent the PPD present another major drawback in the case of an early repayment of the loan or resale of the property in the course of credit: the release costs. Between the fees of the notary, VAT, the property security contribution, registration fees and administrative costs, this can represent a considerable total amount.
The PPD and the mortgage work identically in the event of non-repayment of the mortgage. That is to say that if the borrower can no longer honor the payment of his credit maturities, the lender is entitled to seize and sell the property in order to repay the outstanding capital.
Cost
As seen previously, if the borrower wishes to lift the mortgage or the PPD before the term of the loan, it will have to pay additional costs. To know the relative cost of this operation, you can perform a simulation using this tool on the ANIL website (National Agency for Housing Information).
Regarding the guarantee fees, they vary depending on the option subscribed (mortgage, PPD or surety) and the amount of the initial loan. Depending on the guarantee chosen, these fees are between 0.5% and 2.5% of the total credit amount at the signing of the loan. You can refer to the tables below to estimate the amount corresponding to your situation.
–
Average cost at loan signing
–
|
Borrowed capital |
Mortgage* |
PPD* |
Caution** |
—
** Excluding reimbursement of part of the guarantee fees at the end of the loan. Data simulated on the site of Housing loan on 07/12/2021.
* Excluding any release costs. Data simulated on the site of National Agency for Housing Information on 07/12/2021.
–
Average cost after a loan of € 200,000
–
|
Costs |
Mortgage* |
PPD* |
Caution* |
|
Indicative returnable amount – |
|||
—
*Release fees not applicable if you complete your loan repayments, and you do not prepay or sell your property before the end of the loan.
–
The differences between these two guarantees
–
Unlike the mortgage, the PPD can only guarantee existing real estate or the acquisition of land. This implies that if you plan to build or buy an off-plan apartment, you must have recourse to the mortgage to cover the loan of your future property.
In addition, PPD has the advantage of being much more financially beneficial. First, thanks to the exemption from the land registration tax which alone represents a significant amount. Then because it benefits from a declining percentage on the sale price. Concretely, this means that the higher your loan, the lower the cost of the PPD.
–
Favor the PPD for the purchase of real estate in the old property and the mortgage for the purchase of new real estate.
—
The deposit: the other type of guarantee
–
The deposit is another solution to guarantee a mortgage. It is provided by a specialized financial organization which undertakes to take over if the subscriber is no longer able to reimburse his monthly payments. Thus, it plays the role of guarantor with the bank in the event of default by the borrower.
Less expensive and more flexible than the mortgage or the PPD, the surety leaves the possibility for the borrower to keep his property in the event of financial difficulties. However, it is not accepted by all lending organizations and requires presenting a solid file to be able to claim it.
–
Still hesitating between mortgage or surety? Find out how to make your choice in this article.
—
