It’s a small revolution that will take place this Wednesday, June 1, in the real estate loan. Borrowers will be able to terminate their insurance at any time and not only on the anniversary date of the loan. For the time being, this measure only concerns new contracts, specifies the law of February 28. For loans in progress, it will be necessary to wait until September 1st. The objective is to allow households to compete, as for credit rates, in an insurance market 88% dominated by… banks.
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The French often forget that they can (re)negotiate the loan rate but also that of theborrower insurance. The weakness of the latter – between 0.05% and 0.3% for first-time buyers aged between 20 and 50 years – no doubt leads borrowers to believe that the game is not worth the candle. Mistake! Because, in a context of interest rates which remain, despite everything, very low (1.5% over 20 years and 1.75% over 25 years against inflation of around 5%), the weight of insurance in the cost total credit, keeps climbing. And the key savings can amount to several thousand euros. Thus, a couple in their thirties who borrow 215,000 euros over 20 years at 1.5% (100% insurance on the gentleman and 50% on the lady) can save more than 12,000 euros if they choose insurance from another bank than theirs.
Said like that, this news is something to delight real estate borrowers. But, as so often in recent months, their enthusiasm is in danger of quickly being cut short. Because the cancellation at any time of the insurance is accompanied by a bad surprise. At the end of February, the deputies of the National Assembly also voted in favor of the abolition of the health questionnaire. Measure which only concerns loans of less than 200,000 euros per borrower (therefore 400,000 euros for a couple with a 50% insured quota on each head) and borrowers aged under 60 at the end of the loan.
+5 euros per month for a 25-year loan
Besides, there is nothing to worry about. Quite the contrary. The health questionnaire, which is completed by the borrower when applying for credit, is considered by borrowers as a constraint. Above all, the abolition of this document aims to allow vulnerable populations in poor health to be able to obtain a mortgage more easily. But this good news hides bad news. “If the health questionnaire is removed, the insurer will no longer have the means to know if you are in good or bad health.“, underlines Astrid Cousin, of Magnolia.fr, comparator of borrower insurance.
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However, the insurance rate is higher if you are in poor health than if you are healthy. This surplus will therefore disappear for loans of less than 200,000 euros. To fund this shortfall, insurers may increase insurance rates for wearables. “Professionals anticipate an increase of between 20% and 25%says Astrid Cousin. This logic of solidarity could turn out to be counter-productive by tightening access to credit to young customers with no health history.“. For a loan of 200,000 euros over 25 years granted to a 40-year-old borrower, this increase represents a surplus of 1,500 euros over 25 years and therefore +5 euros per month.
To remedy this, the borrower insurance expert recommends “out of the criteria» affected by the deletion of the questionnaire for «benefit from an insurance rate adjusted to your profile». «You can increase the insured portion of the borrower in good health if you are in a relationship, add a work envelope or lower your contribution to borrow more and thus exceed the 200,000 euro marks (related to the removal of the health questionnaire) or borrow, without exceeding the legal limit of 25 years, over a longer period“, advises Astrid Cousin.
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