There is a solution for property owners who need to free up cash: a mortgage. According to brokers, demand for this type of loan has risen sharply in recent months. What are the features of this contract? And how do you take out a mortgage to free up cash? We explain.
Covid-19 boosts job insecurity in France
Since the start of the pandemic, the economy has stalled and poverty is on the rise. Nearly a million French people have fallen into poverty. More precisely, 9.3 million French people are living below the threshold of 1063 euros per month, according to INSEE.
Charities are sounding the alarm, noting an explosion in requests for food aid. In fact, 8 million requests were recorded in September, compared with 5.5 million last year. Further job losses are expected to push these figures even higher before the end of 2020.
Mortgages, the solution for property owners
Homeowners in need of short-term liquidity can turn to a mortgage loan. This loan allows you toobtain a sum of money by backing a property or financial asset for a specific use, or to have access to restricted or unrestricted cash. The asset on which the loan is based can be real estate or a pledge of a financial asset, which consists in pledging a financial product to a bank in the event of repayment being impossible.
The amount of the loan is limited to 50% of the value of the property when located in Paris, and 30% when located in the regions. However, there are exceptions in dynamic or highly sought-after markets. The value of the mortgaged property is determined by an expert appointed by the bank.
How do I take out a mortgage?
A mortgage can be taken out with a bank or through a specialized broker.
To obtain it, several conditions must be met:
- You must own the property in question
- The property must be free of all warranties
- If the property has been purchased by more than one person, the bare-owner or usufructuary owners must act as joint and several guarantors.
- If the loan is for a non-trading property company (SCI), all the company's partners must be joint and several guarantors of the loan.
This type of credit is essentially aimed at borrowers who wish to use their existing assets to take on debt and make new projects a reality, such as buying a property abroad, starting a business or buying a car. Today, mortgages are mainly used to cope with financial difficulties or when you're in a bind.
Industry professionals have observed an increase in mortgage applications in recent months. The number of applications submitted rose by 31% in Q3 2020 compared with Q3 2019, according to a study conducted by Cabinet Bougardier. This trend is set to continue in the coming weeks.