You have the possibility to take out a borrower insurance to secure the obtaining of a mortgage. What is it about ? What are the precise conditions?
The regulations do not oblige individuals to take out borrower insurance in the event of a mortgage. Nevertheless, this optional insurance is almost systematically offered by the lending institutions. And without it, it is particularly difficult for first-time buyers to obtain a favorable response to a mortgage application …
Guarantees that are covered by borrower insurance
Borrower insurance aims first and foremost to protect your family against the hazards of life through several guarantees (death, total disability, temporary incapacity for work, or loss of employment).
Thanks to this system, if you are not able to pay the monthly repayments for any reason, the insurance takes over. Your spouse or your children do not have to assume your mortgage for you. One-on-one insurance is distinguished when the credit is taken out by a single person, “two-headed” insurance when a couple of co-borrowers assume the payment.
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In addition to this welcome protection, the borrower insurance also plays a second role, facilitating a positive response from the credit institution when applying for a home loan, for one simple reason: the borrower insurance guarantees the repayment whatever happens. The risk of default being covered, the bank is more inclined to grant you the requested credit, or even a larger amount …
How is the cost of borrower insurance determined?
If in the past individuals were obliged to take out the borrower insurance offered by the bank with whom they negotiated the mortgage, this is no longer the case today! Since the passing of the Lagarde law in 2010, competition has become a reality in France: individuals can freely choose their insurer.
And since 2018 , it is possible to renegotiate each year this insurance if the covered guarantees are equivalent! In any case, it is necessary to complete a health questionnaire that allows the insurance company to determine the “risk profile” of the borrower (medical history, long-term illness, accidents) impacting the amount the monthly premium.
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Beyond the borrower’s profile, the cost of insurance also depends on the type of contract. In the case of insurance taken out with the bank, the premium is based on a fixed rate corresponding to a percentage of the capital borrowed, or on a variable rate corresponding to a percentage of the capital remaining due.