Any loan requires a guarantee. When you want to take out a mortgage, you are forced to present sufficient guarantees – in particular taking out a mortgage or involving a surety company. But there is another possibility among these mortgage guarantees: opting for joint and several surety, a mechanism by which a natural person replaces the debtor in the event of default during repayment.
What is joint and several surety?
Unlike the conventional mortgage loan guarantee, when a specialized financial organization acts as guarantor for the borrower, joint and several guarantees consist of calling on a natural person to play this role.
If necessary, it is therefore an individual (or a group of people) who guarantees the proper repayment of the mortgage by the borrower. The surety then has the obligation to satisfy the request of the creditor if the debtor cannot do it himself, by replacing him for the payment of the monthly payments.
Generally, joint and several surety bonds a relative of the borrower – parent (s), brother or sister, uncle or aunt. This commitment is possible when the guarantors themselves provide sufficient guarantees, for example if they already own a home.
The two types of guarantees: simple and united
Although we most often speak of joint and several guarantees, there are actually two types of guarantees.
- The simple surety : it protects the surety since it obliges the creditor to turn to the borrower in the event of default. It is only after having verified his real insolvency that the bank can require the surety to take over (knowing that this person has the right to indicate the goods that the borrower has and that could be seized). This is also the reason why fewer and fewer lending institutions agree to practice it: the procedures are heavy for the creditor.
- The joint guarantee : with this form of bond, no discussion is possible. The bank can immediately turn against the guarantor in the event of default by the borrower, without even checking the latter’s insolvency. If there are several sureties, all are concerned with the repayment of the debt. It is up to the sureties to then request accounts from the debtor…
The difference between the two guarantees is made when the document is signed. The person who acts as guarantor must write the following mention: “By renouncing the benefit of discussion defined in article 2298 of the Civil Code and by committing myself jointly and severally with [name of the borrower], I agree to reimburse the creditor without being able to demand that he sue [name of the borrower] beforehand. “
The joint and several guarantee, a serious commitment
The idea of joint and several guarantees is not to be taken lightly. This commitment can prove to be fraught with consequences if the borrower defaults and he stops paying his monthly payments: the bank is then entitled to turn against the surety and demand repayment of the mortgage. Even if it means requesting a seizure of income, or worse: seizure of the accommodation.
It is a decision all the more risky as the joint guarantee runs throughout the credit, without the possibility of disengagement. With a loan over 15, 20 or 25 years, or even more, this sword of Damocles can result in significant pressure on the person who has agreed to act as surety.
So, of course, joint and several guarantees can be a real moral and financial support, essential for a loved one. But the consequences can be very serious: in the event of the death of the guarantor, it is his / her spouse or children who inherit the bond!
Joint and several guarantees are rarely used in the context of a mortgage. This type of guarantee is more often applied when the loan is made by a legal person – in which case all the partners who participate in the purchase of the property must stand surety.