When you realize your dream of home ownership, it is tempting to rely on your lender to take out mortgage credit insurance. But, it often turns out to be more expensive. Find out everything you need to know about this insurance, which can now be changed every year: great savings in perspective!
What is mortgage credit insurance?
Because a home loan runs for many years, the banks have imposed the subscription of a home loan insurance in order to cover the risks of non-repayment of the loan, and this, whatever the reasons: illness , divorce, unemployment and accidents of all kinds that may occur in the lives of borrowers. Compare the different insurance rates and options with credit-assurance.com.
Mandatory insurance
Until 2010, banks could impose the borrower insurance of their choice. Difficult therefore to refuse if one wished to obtain the financing to concretize his real estate project. However, since the Lagarde law, but especially since the Hamon and Bourquin laws, the borrower is completely free to decline his bank’s proposal and even to change mortgage loan insurance to adopt individual insurance, if he had first accepted that of his banker.
However, if this choice does not need to be justified, certain criteria must be met to proceed with a termination of borrower insurance.
A balance of power suppressed by the legislator
Banks always offer group contracts to their customers. These contracts are less advantageous than individual insurance, because the banks are remunerated on these contracts. And, the margin achieved is particularly interesting for them. This is why the legislator has favored competition on the subject of mortgage credit insurance. Thus, borrowers are no longer at the mercy of their financial institutions which could until then condition the granting of a loan to the subscription of this famous insurance.
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Other cases resulting in termination of mortgage credit insurance
The high cost of the first contract is not necessarily linked to your wish to change mortgage credit insurance. Indeed, there are other reasons that could explain this choice.
Renegotiation of the mortgage
During a mortgage loan renegotiation, initiated to benefit from more advantageous rates, an amendment to your new loan offer can also relate to mortgage credit insurance: you kill two birds with one stone! But, on this occasion, do not hesitate to contact an online insurance broker to maximize your chances of finding the best insurance contract.
Credit redemption
You have not managed to renegotiate your home loan in an advantageous way and you have decided to change banks to benefit from a more advantageous rate than that offered by your current contract. On this occasion, your original insurance is automatically terminated. Before subscribing to another, be sure to study the prices and guarantees offered using, in particular, an online insurance comparator.
Change of quota
When a mortgage is contracted by at least two people, it is possible to change the share of the capital insured by the borrower, with however the risk of seeing an additional premium.
Mortgage credit insurance: a hassle for seniors
You should know that while banks like to lend money to people over 65, through short-term “senior credit” offers — because this target group generally has a good supply, whether it is a low spender and keeps its accounts perfectly — mortgage credit insurance is generally a hindrance to the granting of the loan if it is requested from the bank. However, it is possible to take out a contract with any insurance which, in any case, will make you pay more as the risk of death or disability increases. This is why it is particularly recommended to go through an online insurance broker who can find the most suitable contract and at the best price.
The terms and conditions for changing mortgage insurance
Depending on whether you terminate your mortgage credit insurance contract before its first anniversary date or after, the terms and conditions differ.
Termination before the first anniversary of the borrower insurance contract
Since the Hamon law, it is possible to change your home loan insurance free of charge subject to the following conditions:
- the change must be made within 12 months of the acceptance and signature of the mortgage offer;
- the new contract must present guarantees equivalent to the original contract;
- the request for termination of the original contract must respect a 15-day notice and be sent, with the new insurance contract taken out beforehand, by registered mail with acknowledgment of receipt to his bank.
Upon receipt of the request for termination of the mortgage credit insurance, the bank is obliged to respond within 10 working days. If the banking institution does not respect this deadline or if it unjustifiably refuses your request for termination, it may be sentenced to an administrative fine of 3,000 euros.
Termination after the first anniversary of the mortgage credit insurance contract
Since 1er January 2018 and the entry into force of the Bourquin Law, which confirms the principle of annual termination of borrower insurance, it is possible to change mortgage credit insurance on each anniversary date of your contract. Possible savings each year, therefore. However, if the process is completely free, it requires compliance with the following conditions:
- the new mortgage loan insurance contract must provide guarantees equivalent to the original contract;
- the request for termination of the original contract must be sent, with the estimate relating to the new contract desired, by registered mail with acknowledgment of receipt and respect a notice period of 2 months.
Attention: the presentation of the estimate to the banking organization is really mandatory. Without it, the bank cannot assess and validate the equivalence of guarantees. It can therefore refuse the termination of your current contract.
But, if you have complied with all the conditions, it has the obligation to respond to you within 10 working days. In the event of non-compliance with the latter or in the event of unjustified refusal, it may be sentenced to an administrative fine of 3,000 euros.
