Discharge is the act that stops a mortgage that a borrower has granted to secure his loan. Indeed, in the context of a real estate loan, the lessor who agrees to finance his property may request that the debt be guaranteed by a mutual guarantee. To have access to a rental, some tenants must also call upon a bank guarantee to reassure the landlord. The guarantee thus constitutes a guarantee in the event of non-repayment of debts. In the event of non-payment by the credit subscriber, the bank or financing organization turns to the person who has guaranteed the loan; and he can opt for an attachment of income, pension, or salary. It can also request the sale of the home if the borrower is a first-time homeowner. On the other hand, when the sums owed are repaid in full, the guarantor can request the release of the deposit
Definition of release
Discharge is an act by which the lender or creditor accepts the cancellation of the registration of a security interest such as a mortgage, a surety, a pledge… and it stops the procedures initiated to this effect (such as the precautionary seizure of the property). When the debtor has finished paying the debts, while the proceedings are still ongoing, the request for the release can be made. The term is also suitable for the measure terminating the protection such as a guardianship or curatorship. The operation of releasing mortgage registrations was previously automatic two years after the end of the credit. But since 2006, the duration of this release is reduced to one year and at no cost after the end of the loan. As soon as a borrower requests the acceleration of the release, the procedure is no longer free of charge and requires the lender’s approval. The same is true if the property is to be resold, the owner will have to pay the costs of the release so that the lending bank (e.g. CréditMutuel, Banque Populaire, Caissed’Epargne, etc.) will stop the mortgage guarantee. This legal action means that the beneficiary of the mortgage guarantee agrees to no longer benefit from the guarantees.
Note: it should be noted that this operation involves some costs (this corresponds to about 0.7% of the overall cost).
What is the guarantee?
To be a guarantor for a rental is to guarantee a person financially if he or she does not succeed in fulfilling his or her obligations to the landlord or creditor. The guarantor’s solvency must be assured (i.e., he or she has enough personal property to be able to pay off the debts). The commitment concerns only the signatory of the deed. Any person of full age who is not under guardianship or curatorship in good mental health may act as a guarantor. To do this, a notary must be called in to write a deed or contract of guarantee with the signature of the guarantor. It is also possible to make a private sub-agreement between the 3 entities concerned. The debts or sums that the debtor will have to pay must be written in full and in figures. Handwritten signatures or electronic signatures are all acceptable. There are 5 types of surety bonds
the simple surety bond: this gives the landlord the right to take legal action against the tenant before turning against the surety bond, to recover unpaid rent. In the event of the debtor’s insolvency, the landlord can sue the surety. It is important to read the clause in the guarantor indicating this possibility of negotiation.
the joint and several sureties:
This indicates that the debtor is committed in the same way as the surety. In the case of non-reimbursement, the creditor can choose to turn either to the tenant or to the person who has stood surety. The guarantor can also pursue the debtor by legal means. The surety bond can be made for a fixed or indeterminate amount. In the first case, it is for example a mortgage. In the second case, it could be all debts that the person would have to pay to his bank. The creditor has the right to ask the person who guarantees the repayment of all the debts.
Surety companies: these companies founded by banking institutions make the repayment of the loan in the event of the lender’s insolvency. This paid surety bond does not charge a filing fee and does not require a release. It is proposed by the bank according to the amount of the loan and the borrower’s personal contribution.
And finally, the civil servant mutual guarantee applies to civil servants.
Notes: If the guarantor has a specific term (for example, for a 4-year lease, or during the term of a credit), after this period, the borrower can no longer sue the guarantor. Moreover, in the event of the death of the person who guarantees the rental or loan, the heirs must reimburse the debts existing on the day of death.
How do I apply for the release of the deposit?
The act of release of the guarantee can be stopped when the repayment of the debts is finished or when the act comes to an end. It can also be released when the debtor dies and has no heir who can continue to pay the debts in his place
This model is an example of discharge when the debts are paid in full.
Last name, First name Bank (company name)
(City), on… (Date) Branch of…
Subject: request for release,
On the date of ……., I have given a joint and several guarantees for the debts of Mr (Mrs or the company) (name and surname of the principal debtor) for several X euros.
Since the date of (date of effective repayment of the debt)…… the entire amount guaranteed has been repaid. Consequently, I am sending you this letter because I would like you to release me from my commitment by releasing this bank guarantee.
Note: A copy of the loan agreement and a copy of the schedule should accompany this application. A letter to the principal debtor is also recommended.
In short, the surety is an act that requires careful consideration because its consequences can be significant. If the borrower is no longer able to pay off his debts, the person who stands surety will have to answer for the repayment. The bank may turn against him first to seize his income, cars, etc., and then to the debtor. Such a commitment is not advisable to guarantee a loan. It is preferable to use a mortgage or pledge when applying for a bank loan if possible. On the other hand, when renting a building, if the real estate agent does not trust the solvency of the future tenant, it can use this solution. He can thus apply for a bank guarantee so that the rents are always paid even if the tenant does not pay. When the contract comes to an end, the guarantor can terminate his commitment by requesting the release of the deposit.
Repurchase of credit and security deposit
First of all, during the elaboration of a buyback file, it is necessary to provide a complete file including proofs of his civil status, his financial resources and charges, his debt ratio, and his real estate assets. If the borrower uses a broker, it is the broker who first looks for the bank that can group his debts according to his profile and his debt ratio, then he will put together his file.
As a general rule, the bank offering this solution does not ask for a deposit or a guarantee when setting up this operation. However, in certain cases, when a request for debt consolidation is made by a person on the FICP file, or by a person with a high level of indebtedness, the bank may require financial guarantees. This allows them to ensure the borrower’s solvency. In the event of non-compliance, the financial institution could then turn to the guarantor. To do so, it may require the guarantee of a third party acting as a guarantor. The joint and several guarantees of a parent are frequent for the repurchase of consumer credit but little used for the repurchase of real estate loans. The bank may also request a mortgage on the borrower’s property or proof of his or her employment status. In the absence of these guarantees, it is then able to refuse a request for debt consolidation from a borrower with a difficult file
Otherwise, it should be noted that if the subscriber can pay his or her monthly payments on time, the mortgage guarantee is automatically canceled. However, if the borrower does not pay the monthly payments, the guarantor makes the payment of the debts and the registration of a judicial mortgage at the borrower’s expense and then proceeds with the seizure and sale of the property to recover his money.