Guarantee (security) fees
Guarantee fees are the costs associated with putting in place a security interest protecting the lender against borrower default. Depending on the type of security chosen — conventional mortgage, lender's special legal mortgage (PPD), mutual guarantee (such as Crédit Logement), or bank surety — the amount, calculation method, and potential partial refund differ significantly.
Key points
- Costs vary by security type: a mutual guarantee (e.g., Crédit Logement) is generally cheaper than a notarized mortgage.
- With a mutual guarantee, a portion of the guarantee fund contribution is refunded to the borrower at loan end.
- Guarantee fees are ancillary costs that must be included in the APR calculation.
- A mortgage triggers release fees on early repayment or property sale.
- The PPD (now replaced by the lender's special legal mortgage) is cheaper than a conventional mortgage because it is exempt from the land-registration tax.
Frequently asked questions
How should a borrower choose between a mutual guarantee and a mortgage to minimize guarantee fees?
A mutual guarantee is generally cheaper up front and offers a partial refund at loan maturity, making it attractive for borrowers who plan to keep the property until then. A mortgage may be preferable if the borrower anticipates selling or making early repayment within a few years, since release fees will apply either way. The broker models both scenarios to guide the decision.
Why are guarantee fees included in the APR rather than just in the notary fees?
The APR is designed to reflect the total cost of credit for the borrower, including all mandatory fees. Because the security interest is a non-negotiable condition for loan approval, its costs are included in the APR base. Notary fees related to the purchase deed are not, however, because they relate to the property transaction rather than to the loan itself.
How much does Crédit Logement refund at the end of a loan, and is it guaranteed?
Crédit Logement returns a portion of the guarantee commission paid into the mutual fund; the exact amount depends on the fund's performance and is not contractually guaranteed. In practice, the historical refund has been around 75% of the fund-contribution portion (excluding fixed administrative fees). It is paid a few weeks after loan maturity into the designated bank account.
In practice
For a €250,000 loan, a broker compares two options: a Crédit Logement mutual guarantee costing around €1,800 with an estimated partial refund of €1,350 at loan end, versus a notarized mortgage at roughly €2,800 with no refund but with release fees expected if the borrower sells before maturity. For a client who plans to keep the property for 20 years, the mutual guarantee proves significantly cheaper.
Official sources
- Do you need a guarantee to obtain a mortgage? · Service-Public.gouv.fr
- Obtaining a mortgage loan · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr