Mortgage basics
Guarantee, mortgage or IPPD: the true cost of securing a mortgage
Guarantee, mortgage, lender's privilege: what each form of security costs, what you end up paying, and when the bank requires a mortgage.
The cost of a loan guarantee can be understood in three stages: the initial setup, any potential refund, and early repayment. A guarantee from an institution is paid at the outset and may return a portion of the mutual fund at the end of the loan. A mortgage and an IPPD, which has become a special legal mortgage, require a notarial deed, offer no refund, and necessitate a paid release if you sell or refinance before the term ends.
By Sandy MASCART, mandataire d'intermédiaire en opérations de banque et en services de paiement ORIAS 26000541 sous le mandat de CDV PATRIMOINE & ASSURANCE (ORIAS 14005573)
Key points
- The guarantee protects the bank against default; borrower insurance, on the other hand, protects the family: both incur costs, but for different purposes.
- An institutional guarantee combines a permanently acquired commission with a contribution to a mutual fund, part of which is refundable at the end of the loan.
- A mortgage requires a notarial deed registered with the land registry, with fees added to the notary's fees, taxes and disbursements.
- Selling or refinancing a loan secured by a mortgage triggers a paid release, whereas a guarantee generally requires no release.
- The cost of a guarantee is not limited to the initial setup: it must be understood in three stages, the entry, any potential refund, and the cost of early repayment.
Caution, mortgage or special legal mortgage: the guarantee that is cheapest at the outset is not always the cheapest in total. Read its cost in three stages (setup, restitution, early repayment) to avoid an unpleasant surprise when selling. One of the fundamentals of property financing; for the overall budget, see personal contribution and the budget for a first-time purchase in Lyon.
Guarantee and borrower insurance: who protects whom
The guarantee reimburses the lender if you stop paying, whatever the cause. The insurance covers death, disability, and sometimes loss of employment. You pay for both.
Caution, mortgage, IPPD: the three guarantees
The guarantee from an institution
No notarial deed, no registration on the property. You pay:
- a commission, which is retained by the institution;
- a contribution to the mutual guarantee fund, which is partly refundable.
The fee schedule is specific to each institution and is not regulated. Request in writing the breakdown between the two items.
The conventional mortgage
A notarial deed published at the land registry service: notarial fees, land registry tax, real estate security contribution, disbursements.
Liquidée sur le montant de la créance garantie énoncé au bordereau. C'est un frais de garantie, distinct des frais d'acquisition.
- En vigueur depuis le
- Source
- Légifrance
The notarial fees are subject to VAT, at the rate of 20,00 % () : a net-of-tax estimate is not what you will pay.
The special statutory mortgage (IPPD)
The former lender's privilege, following the 2022 reform of security interests. No land registration tax, therefore less expensive. However, it only guarantees the purchase of an existing property: no works, no construction, no off-plan purchase.
Comparing the cost of guarantees in three steps
| Institutional guarantee | Conventional mortgage | Special statutory mortgage (IPPD) | |
|---|---|---|---|
| Notarial deed | No | Yes | Yes |
| Land registration | No | Yes | Yes |
| Land registration tax | Not applicable | Due | Not due |
| Paid at setup | Commission + mutual fund participation | Fees, taxes, contribution, disbursements | Fees, contribution, disbursements |
| Possible refund at maturity | Partial, on the mutual fund portion only | None | None |
| Costs if sold before maturity | In principle, none | Release to be paid | Release to be paid |
| Covers works and off-plan purchases | Yes | Yes | No |
| Final decision | The guarantee institution | The bank | The bank |
Loan run to term: the guarantee is generally the most favourable. Quick resale: the difference lies in the release, which the guarantee avoids.
Guarantee: what you get back at the end
A portion of the mutual fund participation, never the commission, after the full repayment. It depends on the institution's rules and the fund's loss ratio: do not budget it as income.
The details: who issues the guarantee, and what is refunded to you.
Selling before the end: the hidden cost of the mortgage
The mortgage is lifted by a release, a notarial deed paid at the sale. The guarantee has nothing to lift.
It is read everywhere that “the release costs 0.3 to 0.7% of the borrowed capital”. This percentage corresponds to nothing in the fee schedule: the fee is an amount per bracket.
Added to this are the real estate security contribution, with a minimum of 15 € () per deed, VAT, formalities and disbursements: request the total from the notary. Calendar: the mortgage release.
A loan buyout elsewhere also triggers the release. At maturity, the registration expires on its own, without costs.
Where to read the actual cost of the guarantee
- Financing plan: isolate the guarantee line from the total 'fees'.
- Loan offer: it is the authoritative document.
- Guarantee: the breakdown of the commission and the mutual fund.
- Mortgage: the detailed quote from the solicitor.
The guarantee is calculated on the borrowed amount: a larger down payment reduces both interest and the guarantee.
When the bank imposes a mortgage
When the guarantee body refuses the transaction: purchase through a company, atypical property, high loan-to-value ratio, major works.
- Purchase through a limited company: many guarantee bodies do not cover this (financing through a limited company).
- Atypical property: converted commercial premises, agricultural property, entire building.
- Major works or off-plan purchase: conventional mortgage on the whole or part of the property.
- Financing without a down payment, fees included.
- Profile outside the guarantee body's criteria, even if the bank says yes.
Then, calculate the cost of releasing the mortgage within your resale horizon.
Choosing before the offer
Changing the guarantee during the loan requires the bank's agreement and incurs cumulative fees: almost never worthwhile.
A guarantee changed after the offer is issued requires the offer to be reissued and the deadline to restart: see the offer deadlines.
Compare the guarantee and your resale horizon by telephone, with the financing plan in hand.
Create your file: the guarantee is chosen before the offer.
Sources
- Service-Public.fr — Faut-il prendre une hypothèque conventionnelle pour obtenir un crédit immobilier ?
- Service-Public.fr — Qu'est-ce que l'hypothèque légale spéciale du prêteur de deniers ?
- Service-Public.fr — Peut-on faire lever une hypothèque ?
- Service-Public.fr — Faut-il avoir une caution bancaire pour obtenir un crédit immobilier ?
- Légifrance — Article 881 H du code général des impôts
Read next
- Mortgage in Lyon: frequently asked questions
- First-time buyer in Lyon: the real budget of a first purchase, line by line Transfer duties, notary fees, guarantee, down payment, works: the full cost of a first purchase in Lyon, item by item, with the cash flow schedule.
- Acting as guarantor for a relative’s mortgage: what you are actually signing Acting as guarantor means paying a relative’s mortgage from your income and assets if they cease to pay. What you must check before signing.
- Financing a purchase through an SCI, under IR or IS: what the bank truly requires Mortgage through an SCI: partners’ joint guarantee, debt-to-income ratio, current-account contribution, security. What secures the deal, under IR or IS.
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