Difficult beginnings for the rechargeable mortgage

A statement in the spring of 2004 by Nicolas Sarkozy, then Minister of Economy and Finance, to revive consumption, the rechargeable mortgage is just beginning to materialize.

Since the end of September, three banks, the Crédit Foncier, the UCB and the Savings Bank of Auvergne and Limousin, offer this mortgage secured by a mortgage taken on the financed property and which can be recharged. Clearly, it allows reopening a line of credit within the limit of capital already repaid.

This type of loan can be of service to those who, a few years after buying their home, intend to do work, expand or finance any new needs, not necessarily related to real estate elsewhere, for example, studies of children.

At the time of reloading the loan, the borrower is not required to call on the bank which has granted the initial credit and may apply to the bank of his choice. He then subscribes to a new credit.

The formula is based on a practice widely used in the United States, the “mortgage withdrawal”, where the amount lent also takes into account the market value of the property on which it is pledged.

In times of rising real estate prices, each homeowner can claim a credit commensurate with this increase. Consumption is thus encouraged but also weakened in the event of falling or stagnant real estate prices. The French formula, which is limited to the initial amount borrowed, is more cautious.

This new banking tool has required a fairly deep mortgage reform, a good result of which is the lowering of warranty costs, by an average of 30%. This represents a saving of 590 million to 660 million euros per year for the benefit of borrowers.

Remember that there are three types of guarantees: the guarantee, issued by specialized organizations such as Crédit Logement or Saccef (Caisses d’Épargne group); the lender’s lien, which is similar to a mortgage but is reserved for the financier and attached to the deed of purchase; and the conventional mortgage, which can be registered at any time, for the benefit of all kinds of creditors, for example a syndicate of co-ownership in case of unpaid charges.

According to the new law, only the conventional mortgage is rechargeable, the lender’s privilege having been removed from the device.

But one of the major obstacles to the development of the rechargeable mortgage remains its cost: although having decreased by 16%, it remains the highest of the three formulas.

In order not to lose their share of the market – which accounts for half of the real estate loans – financial surety organizations reacted very quickly and lowered their rates from 30% to 40%.

Thus, for a loan of 100,000 euros, the cost of the conventional rechargeable mortgage is 1,750 euros, that of the guarantee issued by Crédit Logement is 1,300 euros (including 550 euros recoverable at the end of the loan if There was no incident) and that of the lender’s lien is 800 euros.

“We always advise our borrowers to opt for the least expensive formula, which can go up to free for officials supported by their mutuals,” said Catherine Patin, UCB.

The rechargeable mortgage may, therefore, be slowed down in its development because of its cost. It can, on the other hand, be of service to persons who are already owners, having repaid all or part of their home loan and that some reason (age, irregular income) deprives of an easy access to payday loan to the consumption.

These can transform a conventional mortgage into a rechargeable mortgage, or even take out a new mortgage loan, as proposed by the Land Credit. It suffices to add an amendment to the initial mortgage deed, which, according to the simulations of the Crédit Foncier, for a recharge of 40 000 euros, causes costs still high, of 1 175 euros, or 2, 9% of the amount of the recharge.