All you need to know about the mortgage loan guarantee
Are you considering applying for a mortgage with a bank? When you take out a mortgage, you make a promise to repay the money you’ve borrowed, plus an agreed-upon interest rate.
In this case, you should absolutely know what the loan guarantee is. This article tells you a lot about this type of guarantee.
Reminder on the mortgage loan guarantee
The mortgage loan guarantee is the commitment made by a surety company, such as housing loan, to stand surety for you. The latter must of course be approved by the financial institution which granted the credit. It pays first in place of the borrower if the borrower can no longer pay his debt. She then seeks reimbursement through an amicable solution. In rare cases (if an agreement is not found), it proceeds to the sale of the property of the borrower.
The mortgage loan guarantee: how much does it cost?
To choose a mortgage loan guarantee, there are two different fees. First: the bail commission. It will be used to remunerate the loan guarantee company for its services. Second: participation in the common fund. This is useful for paying the credit of defaulting borrowers. Note that you recover part of this money if you manage to repay your loan without problem with the bank.
To help you better understand, let’s take a practical case. If you want to guarantee a loan of $ 200,000, you must plan for $ 2,350 in fees, including $ 400 in deposit commission and $ 1,950 in contribution to the fund. At the end of the contract, you will recover $ 1281.
Why choose the deposit instead of the mortgage?
The home loan guarantee has many advantages. It saves banks time by avoiding the various formalities associated with the mortgage. These financial institutions will continue to receive their monthly payments even in the event of defaulting borrowers, without going through long and complex procedures. For the borrower, the solution in question is economical. He can opt for the suretyship that suits him best as soon as his credit is opened.
A mortgage payment is typically made up of four components: principal, interest, taxes and insurance.