Mortgage or mortgage mandate: the differences

The mortgage

Notaire.be defines it as follows: “A mortgage is a right over a building that guarantees the creditor payment of a debt.” If you do not repay, the creditor can seize the property, have it sold and be paid first.

It is created by notarial deed, a contract between the creditor and you. The notary checks ownership and the absence of other mortgages, drafts the deed, pays the duties and arranges the registration.

What the mortgage covers

Beyond the capital, the mortgage guarantees ancillary amounts: fire or life insurance premiums advanced by the bank, enforcement and procedural costs, and an early repayment penalty. They are generally estimated at 10% of the capital borrowed.

There is also the all-sums mortgage (hypothèque pour toute somme), which covers other loans with the same bank (personal loan, car loan, overdraft, credit line). These debts must be determined or determinable in the deed. Advantages cited by notaire.be: reusing the security with the same bank, a sometimes more favourable rate, no costs of a new deed. Risk: the property secures all the debts with the bank, even those unrelated to the home. The home can be lost because of a default on another loan, even if the mortgage loan is being repaid properly.

Duration

The registration lasts 30 years, whatever the term of the loan, and then expires. Repayment does not erase it: a release (mainlevée, a notarial deed) is needed, especially in the event of a sale or a new mortgage.

The mortgage mandate

With a mandate, you authorise the bank to register a mortgage when it considers it necessary. It may never do so. The mandate must also be made by notarial deed (acte authentique), so before a notary.

Notaire.be specifies that the mandate “is therefore not yet a mortgage strictly speaking”. The bank only grants it to clients it trusts: it finds “less security” in it because, when it wants to register the mortgage, “it may already be too late”.

Costs, side by side

Sources: notaire.be (pages on the mortgage, on mortgage loan costs and the November 2020 article). The pages do not describe every item in the same way: ask your notary for the statement of your file.

Worked example

Payotte’s calculation with the notaire.be rates, for a €200,000 loan:

• base = €200,000 + 10% ancillary amounts = €220,000;
• 1% registration duty = €2,200;
• 0.30% mortgage duty = €660;
• i.e. €2,860 in duties, before the registry fee (€230 or €985), the notary’s fee and the administrative costs.

With a mandate, these €2,860 in duties are not due at signing: you pay €50 in registration duty, €50 + VAT for searches and one quarter of the fee. If the bank then registers the mortgage, you bear its costs.

To estimate your purchase costs, use our tool to calculate your purchase costs. Notaire.be also offers a calculator for the deed costs of a mortgage mandate.

Why the bank prefers the mortgage

The mortgage gives the bank an immediate, registered right over the property. With the mandate, it depends on being able to register it later. It therefore grants the mandate to clients it trusts. Ask your bank before signing the sale agreement (see the guide on the sale agreement).

What to do in practice

1. Ask your bank whether it offers a mandate or requires a mortgage.
2. Ask the notary for the cost of each option, including the cost of a later registration if the bank uses the mandate.
3. Check whether the mortgage is an “all-sums” mortgage and which debts it covers.
4. Remember the release when you sell or refinance (see the guide refinancing a mortgage).

Which professional to consult

The notary handling your file drafts the deed, calculates the duties and arranges the registration. Your bank tells you whether it requires a mortgage or accepts a mandate. A credit broker can compare what several banks require (see mortgage broker).