Just as the owner strives to Securing your rental investment rentals By ensuring that you get your due in all circumstances thanks to various solutions, the bank from which you apply for a mortgage loan is very careful and needs guarantees. The goal: to continue receiving what you owe her, even if you are no longer in a position to do so. In other words, someone (often a specialized organization) takes over if you have difficulties paying. Collateral insurance is one possible solution, along with a traditional mortgage and a legal private mortgage for a money lender. Their very different performance can make guarantor insurance particularly interesting in many situations.
Type of insurance
In case’Buying real estate with a bank loanYou can choose between two types of insurance or guarantee:
- joint guarantee
- Mortgage guarantee.
In the first case, anyone can guarantee to the borrower. It can be an organization, and therefore a legal person, but also a natural person who may or may not be related to the borrower. Exceptions only: Persons with legal capacity. In other words, persons who are still minors or adults are protected. Then, it is up to the lender (the bank) to ensure that the person in charge of the guarantee is able to meet the obligations.
In the second case, the mortgage is not made on a sum of money, but rather it is property. If the borrower fails to pay his rent, the property is forfeited by the lender. Thus, a person who acts as a guarantor protects his assets, because the property can only be seized: the lender cannot supplement the amount that may be lost by taking the money elsewhere.
In any case, finding a collateral does not guarantee approval of your mortgage. The borrower makes his own checks and remains free to decide whether to accept the loan or not. In addition, we should not forget that after paying you if necessary, the escrow insurance turns against you: so you remain liable in case of default.
How do you choose your bond insurance?
Where’In 2014, the UFC-Que chorus described the mortgage-bank guarantee market as “hardened”Guarantee institutions have multiplied, and it is now possible to compete to find the best secured insurance for your mortgage. Each institution is free to set its own prices and conditions: so studying the bank guarantee jigsaw is necessary when you need it to get a mortgage. You will then have to make sure to compare:
- The price of the collateral (related to the amount of the loan and not the purchase);
- repayment amount if the loan proceeds without incident;
- Entry Fee.
Banks generally have a guarantee center and point you to it when you ask them for a mortgage, or to an organization you are a partner in. This is the case, for example, in Caisse d’Epargne, Saccef, Banque Populaire, Socami, Crédit Agricole, Camca, or even Crédit Mutuel and CMH. However, nothing prevents you from choosing the organization that suits you best. You can also ask for your health insurance, especially if you are a civil servant.
Advantages and disadvantages of warranty insurance
Escrow insurance offers a flexible and scalable process for every mortgage application. If a subscription to the foundation is generally more expensive than a mortgage, it is generally less expensive as a whole. Additionally, if you sell your property while you haven’t finished paying off your loan, you don’t have to pay a discharge fee, i.e. no additional cost applies to letting you prepay. In fact, the release is tied to the mortgage and must be made in front of a notary, which explains the costs incurred. But the guarantee insurance makes it possible to do without a notary.
In addition, the borrower recovers a portion of the amount paid upon maturity of the loan. In fact, the security deposit amount is divided into two parts:
- guarantee commission, which is maintained by the insurance organization and allows its financing;
- A contribution to a mutual guarantee fund, which is a mutual fund into which the organization withdraws in the event of a borrower default.
When the repayment of the loan goes well, the organization returns to the borrowed part of the contribution to the joint guarantee fund.
(by HREF Editorial Board)