Guarantee (surety)
An alternative to a mortgage in which a specialized body guarantees the loan in exchange for a contribution. On default, the body compensates the bank then pursues the borrower. Often cheaper than a mortgage and partly refundable, it is the most common guarantee on existing property.
Key points
- Personal security: a guarantor body commits to repay the bank if the borrower defaults.
- No mortgage registration on the property: no formal release at loan end, reduced exit costs.
- Contribution paid into a Mutual Guarantee Fund, partly refundable at extinction without incident.
- File acceptance depends on the guarantor body's own risk analysis, independent of the bank.
Frequently asked questions
How does the recovery mechanism work after the surety is called?
When the borrower defaults, the bank calls on the guarantor body, which reimburses the unpaid installments or clears the loan. The body then has subrogation recourse against the borrower: it steps into the bank's rights and can pursue recovery of the advanced sums, including seizing the property if the situation requires it. The borrower is therefore not released from their debt to the body.
In what cases can a surety body reject a file?
Surety bodies carry out their own file scoring, independent of the bank. A rejection can occur for a debt ratio deemed too high, insufficient disposable income, recent self-employed activity, problematic banking history, or an atypical property difficult to resell. In that case, the broker falls back on a mortgage security or finds another guarantor accepting the profile.
What amount can be refunded at the end of the loan by the surety body?
The contribution paid into the Mutual Guarantee Fund (FMG) represents the majority of the initial contribution. If no repayment incident occurred throughout the loan, the body refunds a fraction of this contribution, the exact amount depending on each body's own rules and the effective loan duration. This refund is automatic at contract end for bodies that practice it.
In practice
A broker sets up a file with a surety to avoid mortgage costs: the initial contribution comes to €2,100, of which €1,400 goes to the FMG. Twenty years later, with no incidents, the body refunds around €800, bringing the net guarantee cost to €1,300 versus €3,200 for an equivalent mortgage.
Official sources
- Article 2288 of the Civil Code (definition of suretyship) · Légifrance
- Do you need a guarantor to obtain a home loan? · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr