You want to borrow a sum of money to buy a kitchen, or finance the acquisition of your veranda for example, to buy a house or to make renovations.
In addition to the usual acceptance conditions, your broker will check your solvency and require guarantees.
When the borrowed amount is significant – over €25,000 – it may happen that your broker requires the establishment of a mortgage on a real estate property that you own free of charges. This is almost always the case when purchasing real estate. Of course, establishing a mortgage incurs costs.
Are there any alternatives to establishing a mortgage on one of your real estate properties? This is what we are discussing today.
What is a mortgage?
A mortgage is a real estate right that is often granted by the borrower to guarantee the repayment of a sum of money they have borrowed. It is a comfortable guarantee for the creditor as real estate properties are assets that maintain a stable value and even tend to appreciate over time – except in extraordinary situations.
Are there alternatives to establishing a mortgage?
Of course, the borrower can always offer other guarantees. We immediately think of surety or the addition of an endorsement. Other more original alternatives are sometimes proposed, such as the redemption of a pension savings or a life insurance policy.
It should be noted that in these latter cases, the beneficiary of a pension savings or a life insurance policy who redeems their rights before the end of the contract rarely makes a good deal. In general, the early redemption value is very unfavorable.
In some cases, guarantees are taken on movable assets (securities accounts or savings accounts).
Effectiveness of these alternatives?
The success of these alternatives is very average because generally the resulting solvency is problematic and when the borrowed amounts are very large, the bank will not be satisfied with uncertain guarantees.