You are an owner and you lack cash to finance a personal project, there may be a solution for you: the mortgage loan. The details of Charlie Cailloux, legal adviser for Particulier à Particulier and the PAP.fr site.
franceinfo: What is a mortgage loan?
Charlie Pebbles: The mortgage loan is a loan granted by a bank to finance the acquisition of real estate (this is the most common use) but also to finance work, a trip or the studies of your children; to guarantee itself, the bank backs a mortgage on one or more assets that you hold.
There is therefore a first important condition: the borrower must already own a property. As you said, the mortgage is for homeowners who, for one reason or another, need cash. If the borrower does not repay the loan, the bank can sell the property to get paid.
This means that if I own a home worth 200,000 euros, I will be able to mortgage this home to obtain a loan?
While continuing to occupy this accommodation, absolutely! And it is the value of this property that will determine the amount you can borrow. To secure the operation, the bank will retain only a ratio of the value of this property, generally between 50 and 70%.
So for your house of 200,000 euros, on which you no longer have outstanding credit, the bank will allow you to borrow between 100,000 euros (for 50%) and 140,000 euros (for 70%) to finance your project. Of course, it’s still a loan, so if you can’t pay it back, she’ll activate the mortgage to pay herself.
But in the end, what is the use of the mortgage loan in this case, I could simply take out a traditional mortgage loan for the acquisition of the second home, the bank will take out a mortgage on this property and that’s it without pledging my first property?
Precisely, the mortgage loan can help people who have real estate assets but who do not have easy access to credit. We can think of seniors: they are generally already owners, no longer repay loans, but may need to make an additional acquisition, such as a second home or a rental investment. The advantage of such a loan is that the calculation of the loan is not only based on your income, but also on the value of the property pledged.
What are the disadvantages of the mortgage loan?
It’s heavy and it’s expensive! A mortgage loan requires special legal guarantees, which entails costs that must be taken into account. First of all, the intervention of a notary is imperative and it will therefore be necessary to pay him.
Then, you have to plan for the land registration tax and related costs. If we take our example with a loan of 100,000 euros for a purchase in the old one, this represents approximately 1,500 euros in costs.