When purchasing real estate financed by a loan, the bank requires a guarantee to protect itself against potential default. The conventional mortgage is one of the most common options, alongside the guarantee and the lender’s privilege. The question of who pays the costs related to this mortgage guarantee consistently arises in negotiations between the borrower, the bank, and the notary.
Reform of securities and transparency of mortgage fees since 2023
Ordinance No. 2023-331 of April 25, 2023, reforming the law on securities has harmonized and simplified the mandatory mentions of mortgage deeds. Notaries have had to update their deed templates and their fee schedules for mortgage registrations and discharges starting from 2023-2024.
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This reform has not changed the fundamental rule: the borrower bears the mortgage costs, unless otherwise stated. However, it has enhanced the readability of the deeds, allowing for better identification of each cost item before signing.
At the same time, the mortgage credit reform resulting from Ordinance No. 2016-351 and the decree of June 9, 2016, which has been monitored by the DGCCRF in its 2023 report, requires banks to provide a standardized information sheet and a personalized loan sheet. These documents must detail who pays each fee item, including the mortgage fees on a real estate loan and discharge fees, before any offer is signed.
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Composition of mortgage fees: what the borrower actually pays
Mortgage fees are not limited to a single line on a notarial quote. Several distinct items add up, and their respective weight varies depending on the loan amount and the type of property financed.
- The notary’s fees, calculated according to a regulated scale proportional to the amount guaranteed. The notary does not freely set their remuneration for this type of deed.
- The property publicity tax, paid to the public treasury upon the registration of the mortgage with the property publicity service. Its rate differs depending on whether it is a new or old property.
- The real estate security contribution, intended to cover the costs of maintaining the real estate file.
- The disbursements, meaning the expenses advanced by the notary to obtain the necessary administrative documents (mortgage statements, land registry extracts). These amounts vary from one notarial office to another.
The borrower pays for all these items, usually on the day of signing the loan deed at the notary’s office. These fees are distinct from acquisition costs (wrongly referred to as “notary fees”) and are added to them.
New or old housing: a tax difference to know
The property publicity tax applied during the mortgage registration is not the same depending on the nature of the property. For a new property, the applicable rate is lower compared to that of an old property. This difference can represent a significant gap in the total cost of the guarantee, a parameter rarely highlighted by banks at the time of simulation.
Discharge fees of the mortgage: who pays in case of sale or early repayment
The mortgage does not automatically extinguish upon the last payment of the loan. It remains registered in the real estate file for one year after the theoretical end of the credit. If the borrower sells the property or repays their loan early before this date, a mortgage discharge is necessary.
The discharge generates additional costs for the borrower. It requires a separate notarial deed, with its own fees, registration rights, and disbursements. These costs are generally in a range significantly lower than those of the initial registration, but they often surprise sellers who had not anticipated them.
In the case of a mortgage buyback by another bank, the discharge of the initial mortgage is mandatory before the registration of a new guarantee. The borrower bears the discharge fees and those of the new registration, which can increase the actual cost of the loan buyback.
Amicable or judicial discharge
When the loan reaches its normal term, the mortgage disappears from the real estate file one year later without any action or fees. This is the automatic discharge. However, if a sale occurs before this deadline, the notary must proceed with an amicable discharge, formalized by a deed. The judicial discharge, which is rarer, occurs in the event of a dispute between the parties and incurs additional costs related to the procedure.
Negotiate the coverage of mortgage guarantee fees with your bank
The practice of banks offering partial coverage of guarantee fees (mortgage or guarantee) has developed in the commercial offers for 2023-2024. This trend particularly concerns first-time buyers or high-income borrowers.
However, these discounts are almost always conditioned on the bundled subscription of other products: home insurance, opening a current account, savings investment. The savings made on mortgage fees should be compared to the overall cost of these additional commitments over the duration of the loan.
Some borrowers choose an alternative to the mortgage to reduce costs. The guarantee, offered by specialized organizations, does not require a notarial deed and avoids discharge fees. Its initial cost may be lower, and part of the amount paid is sometimes refunded at the end of the loan.
The choice between mortgage and guarantee depends on the borrower’s profile and the type of property financed: the guarantee is not always accepted by all banks, and the mortgage remains the only option for certain arrangements (mortgage loan on a property already owned, for example).
The answer to the initial question remains constant in French law: it is the borrower who bears the mortgage fees, both at registration and at discharge. Recent reforms have not shifted this burden, but they have made the cost items more readable and the comparison between guarantees more accessible. It remains for each buyer to weigh the cost of the mortgage against that of the alternatives, including exit fees in the calculation.