How a guarantee works for a mortgage over 80% – CVBJ


Updated Friday, December 31, 2021 – 12:00

Most banks provide mortgages to finance up to 80% of the value of the home. In order to obtain more financing, it is usually requested that another person guarantee the transaction.

Whoever secures a mortgage is liable for the debt if the owner of the loan does not meet his obligations.

With a mortgage, you can normally finance up to 80% of the cost of a home. For banks, exceeding this limit increases the risk of default, which is why they rarely do so. The problem is that many people, especially young people, don’t have enough money saved to pay the remaining 20% ​​plus taxes and other expenses associated with the purchase.

In these cases, there is a way to get a mortgage that finances more than 80% of the purchase: have the operation guaranteed by another person (parents for example). But before resorting to this solution, the analysts of the banking comparator advise to know how a guarantee works, what are its risks and how they can be limited.

The guarantee, an additional guarantee

The one who guarantees a mortgage (the guarantor) Responsible for the debt if the loan holder does not meet his obligations. This gives the bank more security than having an additional means of recovering the borrowed money in the event of default. And for this reason, providing a rider increases the chances of getting a mortgage that finances more than the usual 80%.

But what does it mean to meet a debt? If the mortgagee does not pay the installments, his property and that of the guarantor can be seized. to settle the unpaid debt. What the banks do in these cases is first to seize the home of the mortgaged person. If your auction is not enough to pay off the outstanding debt, they seize the present and future assets of the owner and guarantor until it is settled: properties, money deposited in bank accounts, part of the salary…

The guarantor, Thereby, you risk losing your assets if the mortgage doesn’t pay. If a person needs to finance more than 80% of a home purchase and is considering providing an endorsement for the transaction to be approved, HelpMyCash will advise them. make numbers to make sure you can afford the fees No problem.

It’s not the same as guaranteeing a house

It is also common for the parents of the applicant to “guarantee” the mortgage with their home so that the applicant can obtain more than 80% financing. Those who provide an asset as additional collateral for a loan are not really guarantors, but non-debtor mortgage creditors.

The operation is somewhat different from that of a guarantee. In this case, what is done is secure the percentage that exceeds 80% with someone else’s ownership. If the mortgage payments are not paid, the bank can only seize the assets of the non-debtor mortgagee (not their other assets) to recover that money, in addition to the owner’s housing and present and future assets to settle the rest. debt .

It is advisable to limit the warranty

In both cases, HelpMyCash analysts recommend agree with the bank limit approval. That is to say for which automatically disappears when the customer has returned the amount that exceeds 80% the value of your home. For example, if a mortgage of 100,000 euros were taken out to buy a house of 100,000 euros, the collateral would be canceled after restitution of 20,000 euros (and payment of the corresponding interest).

Some banks, In reality, already include this limitation by default. With the Banco Santander youth mortgage, which finances up to 95% of the purchase if the parents guarantee the owner, the guarantee expires when five years have passed from the signing of the deed. And with the VIVE Joven Mortgage, which finances up to 100% of the purchase if the parents guarantee their housing, this property is released when the pending capital represents 80% of the value of the property purchased.

According to the criteria of

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