You wish to proceed with a mortgage repurchase or a consolidation of credits. Yes, but now, one or more of your current loans are guaranteed by a conventional mortgage on real estate that you own.
Accordingly, it is necessary to release the existing mortgage. What operation is it? What is the mortgage release for and how much does it cost? Follow the guide, we’ll explain …
What does mortgage release consist of?
Definition of mortgage
Before tackling the very notion of release, let’s take a look at the mortgage for a moment to put the facts in context. The mortgage is a real estate security, taken on real estate belonging to the debtor, in favor of his creditor.
In this case, in the context of a real estate or consumer bank loan, the debtor is the borrower and the creditor is the banking establishment. The mortgage, registered in a notarial deed by the head of the office (formerly called registrar of mortgages), gives the banking establishment the right to seize and sell the property in the event of default of the mortgage. ‘borrower.
Definition of release
As for the release, it consists of another notarial act, this time attesting that the borrower has no more debts to the lender. It is systematically used in the context of the repurchase of credit, but also in the event of the sale of the property before the term of the loan.
On the other hand, it is useless if the good is paid in full and that the owner keeps it, since the mortgage is automatically extinguished 1 or 2 years after the end date of the credit taken out. It is therefore only useful to terminate a guarantee incompatible with a new situation.
This is because a new bank cannot finance a loan when an old bank has taken out a mortgage, and a new owner cannot buy a house on which another person’s mortgage exists.
What is the mortgage release for?
Mortgage release, also called more simply mortgage release, takes place in the following situations:
- Sale of the property before term since the associated loan is repaid
- Total early repayment following an inheritance, a donation, an entry of money or a repurchase of credit, since the loan is settled by the credit repurchase organization
Concretely, the lifting of the mortgage takes the property out of the framework of land registration and is only possible once the outstanding capital has been paid in full.
Just like the mortgage, the release of the mortgage is registered with the notary. This is a chargeable operation, but necessary in the context of the repurchase of credit.
How much does the lifting of mortgage cost during the repurchase of credit?
The release of the mortgage is carried out by the notary and costs the borrower from 0.7% to 0.8% of the amount of the initial loan. The exercise costs are made up as follows:
- The emoluments of the notary, corresponding to his remuneration
- 20% VAT on fees
- Release registration fees
- The remuneration of the mortgage registrar
- Costs and disbursements related to various administrative formalities
In the event of the resale of the property, the costs associated with the lifting of the mortgage are deducted from the amount of the transaction. In the event of credit redemption, these costs are included in the new credit.
And after, is a new mortgage compulsory?
During the repurchase of credit, the new establishment takes over one or more of your loans to constitute a single one, at a single rate and a single maturity. As a result, the credit repurchase organization will also need a guarantee.
Two cases are to be distinguished, even if nuances can be made according to each loan file:
- Real estate loan repurchase: the new establishment takes a deposit and does not ask for a mortgage, you are not obliged to lift the previous mortgage, nor to pay fees for a new mortgage
- Consolidation of credits: the new institution takes over a mortgage, you must release the old mortgage and pay the costs related to the new one
Even if the mortgage release fees and / or mortgage taking may seem expensive, they often allow you to benefit from more advantageous credit redemption conditions. In addition, the amount of its operations can be integrated into the repurchase of credit.