Caution or hypothèque explained: how a French bank secures your loan

Why the bank wants a guarantee

A French bank will not lend on a property without security. The loan offer states which guarantee it requires, and its cost counts in the TAEG. There are two families: a caution (guarantee) from a specialist company, or an hypothèque (mortgage charge) registered against the property. A person can sometimes act as guarantor instead, but banks do not always accept it.

The caution: a guarantee company

With a caution, a specialist company such as Crédit Logement undertakes to repay the bank if you default. It studies your file separately, looking at your job, your debt-to-income ratio and your deposit. If you stop paying, it repays the bank and then turns to you, first for an arrangement and, failing that, through a seizure procedure that can end in the sale of the property.

The fee has two parts: a commission the company keeps and a contribution to a mutual guarantee fund. Part of that contribution can be refunded when the loan ends, under the company's conditions. Nothing is registered at the land registry, so there is nothing to release if you sell. The weakness for non-residents is access: guarantee companies rarely accept borrowers living abroad.

The hypothèque: a charge on the property

• Hypothèque légale spéciale du prêteur de deniers. The charge a lender takes when its loan pays for the purchase of an existing property. It replaced the privilège de prêteur de deniers in 2022. It is not subject to the land registration tax (taxe de publicité foncière), which makes it the cheaper charge, and it cannot cover works or an off-plan purchase.
• Hypothèque conventionnelle. A standard mortgage charge, signed before the notaire. It is used for works, off-plan purchases and property you already own, and it pays the land registration tax.

A purchase with works often combines the two. Either charge stays registered for the term of the loan plus one year, then lapses automatically at no cost. If you sell or repay before then, the notaire has to release it (mainlevée), for a fee that depends on the original loan amount.

What non-residents usually get

For a buyer living abroad, the bank nearly always takes a charge on the property. On the purchase of an existing home, that means the hypothèque légale spéciale for the part of the loan paying the price, with a hypothèque conventionnelle for any works. You do not choose: the bank sets the guarantee in its offer. Budget around 1–2% of the loan, paid from your own funds at completion along with the purchase costs. The calculator includes a guarantee cost, so you can see its effect on your own funds and on the all-in rate.

Worked example: the cost over the life of the loan

Assumptions: a €300,000 loan over 20 years, repaid after 8 years when you sell. The amounts are illustrations of how the costs work, not tariffs.

The caution's €3,300 is taken as a €1,000 commission plus a €2,300 fund contribution, of which €1,700 comes back. On these assumptions the caution costs less than half as much. If you kept the loan to term instead, the charge would lapse with no release fee and its net cost would be €2,700, against €1,600 for the caution. In practice, a non-resident is rarely offered the choice.

Next step

Ask for the guarantee cost in writing with each offer, and compare offers on the TAEG, which includes it. If you may sell within a few years, add the release fee. Start with the eligibility check, and see the non-resident guide for the other costs on top of the price.

Questions