The vast majority of borrowers have their eyes fixed on the interest rate of their home loan, forgetting that theinsurance, essential to guarantee financing, weighs heavily in the overall cost. However, loan insurance is negotiated, both upstream and downstream. Don’t miss this opportunity to better master this “hidden” expense by putting offers into competition at any time.
Borrower insurance: expensive but forgotten
Getting the best home loan offer is not limited to nominal rate performant. If interest represents the first expense, other costs make up the overall cost of bank financing:
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application fee
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the guarantee (mortgage or deposit)
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the bonuses ofborrower insurance
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additional costs (assessment of the property, opening and account maintenance costs, brokerage fees)
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any other expense which conditions the granting of the loan.
Overall cost of a home loan
All these added costs are integrated into the APR (Global Annual Effective Rate), the indicator of final cost of a mortgage. This must not exceed the twear and tear applicable for the duration concerned.
The interest rate is the window of credit. Behind, costs which are not hidden, since the regulations oblige banks to mention them, but too often ignored by the borrower. Starting with theloan insurance, second cost after interestsuffice to say the importance of this element from a strictly financial point of view.
The cost of borrower insurance
However, it is impossible to escape it. Subscription to insurance is imposed by the lender for secure real estate credit in the event of life accidents to which the borrower may be a victim.
Death, disability and incapacity for work are the three major risks covered by loan insurance via dedicated guarantees; marginally, unemployment can be covered. In the event of a claim, the insurance reimburses the bank up to the guarantees taken out and the proportion if borrowing between two people. The other security, mortgage or guarantee, intervenes in all other situations not covered by borrower insurance (non-payment).
This protection guaranteed by borrower insurance has a cost: on average a third of the overall cost of a real estate loan. Depending on the risks embodied by the borrower (agestate of health, profession, smoking or non-smoker, dangerous sporting practice), the insurer will apply a rate with or without extra premiumand sometimes warranty exclusions in the event of increased risks.
Age is a central parameter: insurance costs more the older you are, regardless of any other risk. Here are the home loan insurance rate ranges by age group:
|
age range |
Average insurance rates |
|
20 -30 ans |
Between 0.09% and 0.38% |
|
30 – 45 ans |
Between 0.12% and 0.45% |
|
45 – 55 ans |
Between 0.35% and 0.65% |
|
55 – 65 ans |
Between 0.50% and 1% |
|
From 65 years old |
0.70% and more |
An unavoidable expense, borrower insurance can fortunately to negotiate.
Borrower insurance: long live the competition!
Free choice of loan insurance
First option, negotiate insurance at the time of your loan application. The Lagarde law allows you to refuse the insurance contract from the outset offered by your bank, in favor of a external offer with at least equivalent guarantees. You assert the principle of insurance delegation which authorizes you to take out freely chosen insurance from the competition.
Use a home loan insurance comparator to access the best contracts on the market and select the offer that meets your expectations and the bank’s requirements. With equivalent guarantees with the banking group contract, a sine qua non condition for the lender to accept a delegated offer, you can make reduce the cost of insurance by 60%.
Change borrower insurance at any time
The regulatory shock however came with the Lemoine law. A tiny proportion of borrowers manage to take out the insurance of their choice when applying for a loan: around 85% of credit insurance contributions fall into the pockets of banks, to the detriment of the financial interests of borrowers. Even if the change of insurance during the loan was made possible in 2014 with the Hamon lawcompleted in 2018 by theBourquin amendmentthe market remains swallowed up by the banks.
The Lemoine law simplifies the procedure, allowing change mortgage insurance at any time, without waiting for the maturity date and without minimum subscription commitment. It is clear that the alternative contracts are on the risewith a doubling of requests to change insurance since the entry into force of the Lemoine law for all in September 2022.
Our advice is to change contract quickly to save a lot : the cost of insurance is in fact calculated on the outstanding capital; it is therefore at the start of the loan that the approach is optimized.
Check out our real estate purchasing power barometer for October 2023 : you will see, with supporting figures, that by changing contracts as soon as possible after signing the loan offer, you maximize potential savings.
The Lemoine law offers a second chance to all those who could not, did not know or did not have the time to negotiate their insurance from the start. Be accompanied by a real estate loan insurance broker to find the contract that will guarantee you suitable protection at the best price, in accordance with the requirements of your bank.
2023-10-31 07:51:08
#Borrower #insurance #hidden #cost #property #loan #Magnolia.fr
