The surety and the mortgage are the two categories of possible guarantees in a mortgage loan agreement. There are several differences between them.
The costs
The surety is an act under private signature which does not require any registration, no notarial act or any obligation of publication in the official journal. In the case of a guarantee by a financial institution, the borrower will have a contribution to be paid into a mutual fund. This cost represents approximately 1% to 1.50% of the overall loan amount.
The mortgage must be signed in front of a notary to be valid. In addition to registration and publication costs as well as the notary’s fees, there must be a show of hand costs in the event of early repayment. It represents about 2% of the total loan amount (without the raising charges).
It must be concluded that the surety is more economical since it is estimated to make a gain ranging from 30 to 50% by opting rather for the surety than for the mortgage.
The risks
In the case of a mortgage, the borrower can lose his property permanently. In order to avoid this unpleasant situation, he has the possibility of making an amicable agreement with the bank. Debt rescheduling solutions can be considered, but this will not exempt him from paying the entire loan in addition to the late payments. Once the seizure is ordered, the debtor can do nothing more. Once the mortgage has been properly registered, there is no further possibility of recourse.
The main risk in a surety case is to lose credibility. If the surety is joint and several, it will be requested from the first case of non-payment. While a simple surety automatically triggers legal proceedings against the debtor before turning to the surety. But by using a surety company, this kind of problem is quickly avoided.
The reliability of the guarantee
Banks will trust collateral in the form of a surety more because surety companies are more reliable than people.
The mortgage presents a major risk for the bank: the sale price of the property may not repay the entire loan. Despite the right of privilege and the resale right from which it benefits, the bank can refuse if it considers that it has been wronged.
Procedures and formalities
In the case of a mortgage, there are many steps to follow. It may take several weeks to build up the warranty. It is therefore important to do it in advance in order to respect the deadlines imposed in the loan offers made by the banks.
The deposit is obtained on study of the file. The surety company can accept just as it can refuse. It will therefore take 48 to 72 hours to get a response.
Which guarantee to choose for your mortgage?
In view of this information, we cannot see the superiority of the surety over the mortgage. The deposit is simpler, faster and more economical. It does not require any notarial process, no registration. In addition, the chances of obtaining a loan are higher with a surety bond given the intrinsic links of banks with surety companies. In addition, the borrower has the possibility of recovering part of his contribution at the end of the loan contract. Indeed, the surety company takes a commission on the starting contribution. The commission varies from bank to bank. If all goes well until the end of the contract, the borrower will be able to recover up to about 80% of the sum initially deposited. It is therefore not surprising that more and more borrowers prefer to opt for the surety these days.
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