Coming as collateral for your home loan, borrower insurance is almost essential to obtain your bank loan. But it has a significant cost and is added to the amount of your loan maturities.
How to pay for it less while respecting the equivalent guarantee and being well protected? We take stock to give you all the leads to follow.
What is home loan insurance?
Mortgage loan insurance allows the repayment of loan maturities in the event of default by the borrower, whether due to disability, incapacity or even death. It therefore constitutes an important guarantee for the lending institution and for the borrower or his heirs.
Optional guarantees, such as temporary incapacity or loss of employment, can be added to the contract. Contrary to popular belief, since 2010 it has been possible to choose or change borrower insurance freely before the acceptance of the mortgage offer or during repayment thanks to the delegation of insurance.
What is the borrower insurance delegation?
The insurance delegation has existed since 2010 and was established by the Lagarde law. It designates the possibility for the borrower to choose mortgage insurance external to that offered by the lending institution. The conditions for this change to be accepted are on the one hand the equivalence of the guarantee, and on the other hand compliance with the termination deadlines:
- The subscription is free before the loan offer is accepted and signed
- The change is possible at any time during the first year provided it is done at least 15 days before the first due date (Hamon law)
- The change is possible every year on condition of respecting a notice period of 2 months before the annual deadline (Bourquin amendment)
Comparing borrower insurance contracts is therefore the first step to pay less.
Playing on guarantees to lower the price of mortgage insurance
It is possible to reduce the price of insurance simply by reducing the guarantees. It is nevertheless necessary to respect the minimum guarantees imposed by the bank and to weigh the pros and cons before opting for a reduction.
Lower the insurance rates with a co-borrower
When the mortgage is made with two people, the requirement is to cover the loan at 100%. To put it simply, you don’t have to insure every head with 100% insurance on each. You can spread the risk to 50/50 or 80/20 for example.
Take the example of a couple who realizes a bank mortgage of 200,000 euros and faces monthly repayment deadlines of 1,000 euros. By ensuring 100% each, the couple pays 100 euros in borrower insurance in total. But by ensuring 50% each, the couple pays 50 euros insurance in total.
In the event of the death of a spouse in the above example, here are the dates supported:
- If the spouse was 100% insured, the mortgage is fully repaid and the surviving spouse has nothing more to pay
- If the spouse was 50% insured, the mortgage is reimbursed at 50% and the surviving spouse therefore has deadlines of 500 euros to repay
Refuse optional guarantees
The guarantees relating to temporary incapacity for work and loss of employment are costly and limited in time. It is important to really study the insurance conditions before purchasing them to see if they are relevant in your situation.
Indeed, job loss, for example, is only taken into account for permanent contracts, subject to seniority and in limited cases of departure from the company. A waiting period and partial assumption of loan maturities can also be applied.
Knowing that this type of guarantee is optional and that the support is less, do not hesitate to ask for the rates with or without an option to see if it is not preferable to remove them in favor of monthly savings for example.
Competition to pay less
Once you know the minimum guarantees required by the bank, and once you have studied the relevance of optional guarantees, you can calmly search for the best mortgage insurance offer.
It is possible to mandate a broker for this mission by specifying your requirements, or to carry out the procedures yourself by using an online insurance comparator to find the borrower insurance at the best value for money. .
In any case, before deciding on an insurer, check the following:
- The total cost of borrower insurance in euros
- The TAEA (Annual Effective Insurance Rate) as a percentage
- Possible waiting periods depending on the guarantees
Keep in mind that home loan insurance can dramatically decrease your monthly payments and significantly lower the overall cost of your loan. So, if there are long years to pay back, you can save thousands of euros: don’t hesitate to play the competition!