When you borrow as part of a mortgage, you will be required to provide a payment guarantee to the bank. In the majority of cases, this materializes by taking out mortgage loan insurance.
It represents an important investment over the long term, which directly impacts the amount of your mortgage loan maturities. So, to save money, it is interesting to lower the rate of your borrower insurance.
Evaluate the real cost of borrower insurance
To compare the different mortgage loan insurance offers in terms of real cost, it is necessary to understand the different data at your disposal.
Thus, two main criteria must be taken into account:
- The TAEA: it is the effective annual insurance rate, determined by subtracting the APR (Global Effective Annual Rate) of the loan with insurance from the APR without insurance
- The total amount of contributions: this is the price you will have to pay during the life of your loan for your borrower insurance, it is important to refer to it if you have to compare a fixed rate contract to another at declining rate
Rest assured, the TAEA as the overall cost of contributions are a legal obligation. As a result, both will be communicated to you by the insurance organizations.
Negotiate with the lending institution
The mortgage loan insurance rate offered to the borrower results from the study of his file. It is determined by several factors and depends on the profile of the loan subscriber and his possible co-borrower.
Among the criteria that impact this rate, we can mention the age of the borrower, his state of health, his profession and his hobbies. Here there is no question of changing the variables since insurance only works for exact risk statements.
On the other hand, it should be known that mortgage insurance is quite lucrative for banks, which practice a comfortable margin sometimes up to 50% of the price of the insurance.
It is therefore possible to negotiate directly with the lender, especially if your profile is not considered to be at risk and you are accepted without additional premium or medical questionnaire.
Dare to request a drop in the borrower insurance rate directly from your bank, for example by subjecting it to insurance found in competition at lower rates. If your request is refused, you still have the “insurance delegation”.
Take advantage of the insurance delegation
The insurance delegation was established in 2010 by the Lagarde law. It gives the borrower the possibility of subscribing to mortgage loan insurance external to that offered by the credit organization.
You can therefore choose a more advantageous offer with a lower rate, without the bank being able to oppose it. However, there is only one condition to be observed: the guarantees must be “equivalent”, ie identical or superior to those offered by your credit institution.
Take advantage of the right to terminate with the Hamon law
Very often, the borrower feels “trapped” by the bank, which grants him a preferential bank interest rate for his loan, but does not grant him a lower rate for his borrower insurance.
Rather than oppose your banker, it may be better to negotiate other important elements of the mortgage loan (pause or modulation in payments in the event of difficulty, negotiation of prepayment indemnities) and accept the insurance mortgage loan in the state.
Thanks to the Hamon law, you can terminate your loan insurance at any time during the first year of your mortgage, without the bank being able to claim the lowest costs for this operation.
Thus, it is common to opt for delegation of insurance during the first year of borrowing to take advantage of an attractive insurance rate. It is just necessary to respect a period of 15 days of consideration before setting up the new borrower insurance.
Take advantage of the right to termination on the anniversary date
It is also possible to change mortgage insurance once the first year of subscription has ended. For this purpose, it is necessary to respect a notice period of two months before the expiry date of your contract (which is the anniversary date of this one).
Once again, the equivalence of guarantees is required. A change of insurer, even after several years, can save you substantial money, especially if you find a better insurance rate or if there is a reduction in risk (smoking cessation or long illness dating back more than 10 years for example).
Lower the insurance rate thanks to an external boost
To find borrower insurance at the best rate, while taking advantage of maximum guarantees, you can benefit from outside help. The first solution that comes to mind is to use the services of a broker, especially when taking out the mortgage.
The second solution is to use online home loan insurance comparators. It only takes you a few minutes and allows you to quickly find out which insurer to direct you to in order to benefit from the most interesting insurance rate.