The borrower's insurance and the loan guarantee are necessary prerequisites for the financing of a real estate project. They allow banks and credit institutions to anticipate possible payment defaults during the loan period.
Good reasons to get insurance
Insurance allows you to protect yourself against the risk of not being able to repay the loan instalments. Although it is not compulsory, it is often essential to obtain a real estate loan. This guarantee generally covers the risks linked to the death of the borrower or a co-borrower, illness and disability (temporary or permanent) following an accident and loss of employment. The bank generally offers the borrower its own mortgage insurance, but the borrower is free to choose another insurance company if he finds the bank's insurance too expensive or unsuitable for his profile. This is known as delegated insurance. However, the contract chosen must offer the same level of guarantee as that offered by the lending institution. It is therefore important for the borrower to be able to compare the different loan insurance options available to him.
This is why banks are obliged to provide each borrower and co-borrower with a "standardised information sheet" detailing the main characteristics of the proposed loan insurance, including the total cost of the insurance and the amount of the premium.e, among which are the total cost of the real estate loan insurance over the duration of the loan, expressed in euros, as well as the characteristics of the minimal guarantees required by the lender to obtain the latter.
Loan insurance
Choosing it well
Knowing that the cost of the insurance can represent up to 30% of the total cost of the real estate credit, it is very important to choose it well and to compare the available offers. Start by asking yourself which loan guarantees are really useful for your profile. You probably don't need a loss of employment guarantee if you are self-employed or if your income does not come from a salaried activity.
There are other little "subtleties" that you should keep in mind. To make sure nothing is left to chance, take the time to read the fine print. Some contracts may provide for exclusions from coverage, for example if you have a high-risk job or practice an "extreme" sport.
Check also that your contract is not fixed and that the guarantees can be adjusted according to the evolution of your professional or personal situation (health problem, new job...). The application fees when you sign up (and if you cancel) should also be studied closely and compared.
Your insurance does not suit you anymore
Change it!
You already have a loan insurance, but it seems too expensive or unsuitable for your situation. This is the opportunity to renegotiate your contract. This operation offers two main advantages: better guarantees and savings. If it was already possible to choose an organization other than the lending institution, a new step has just been taken. It is now possible to cancel your insurance at any time and not only within 12 months (Hamon law) or on the anniversary date (Bourquin law). This measure applies since June 1, 2022 for new real estate loans and from September 1, 2022 for borrowers who are already repaying their loan. In addition, insurers will have to inform their policyholders, each year, of the existence of this right and its implementation procedures.
Good news never comes alone
In addition to the possibility of changing insurance at any time, there is also :
- the elimination of the medical questionnaire for real estate loans under € 200,000 and whose term occurs before the 60th birthday of the borrower.
- the reduction of the period of the right to forget for cancers and hepatitis C has been reduced from 10 to 5 years. Former patients no longer have to declare their illness to the insurer 5 years after the end of their therapeutic protocol.
The deposit
A wise precaution
The guarantee is a way for the lending institution to protect itself in case of default of the borrower, i.e. in case of non-payment of the monthly payments. This guarantee takes the form of a contract by which financial establishments, insurance companies or professional mutual insurance companies undertake to ensure the payment of the monthly instalments of a real estate loan in case of default of the borrower. It allows to guarantee the payment by a third party of the sums due to the bank, in case the debtor could not ensure the repayments any more.
In case of unpaid due date by a borrower, the bank turns to the guarantor organization. This one substitutes itself to the debtor by paying the monthly payments in his place. In order to obtain reimbursement, the guarantor company can then opt for an amicable settlement with the debtor (payment deadlines, for example), or for legal recourse (seizure of the property, legal mortgage to provoke the sale of the property...).
Please note: the guarantor can only guarantee a Social Accession Loan (PAS) if the amount of the loan is less than 15 000 €. In the case of a zero-interest loan (PTZ), the guarantee is necessarily a mortgage when a PAS is associated.
Guarantee and succession
In case of death of the guarantor and in the absence of restrictions provided for in the deed of guarantee, the guarantor's commitment is transmitted to his heirs who are then required to honor it (except in the case of an acceptance of the estate up to the net assets or a renunciation of the estate). To avoid this, the bank can ask the guarantor to take out death insurance for the benefit of the lender.
Guarantee
How much does it cost ?
In the case of a bank guarantee, in return for the guarantee, the borrower pays the guarantee company a commission to remunerate the organization (on average from 150 to 600 €) and a participation to a Mutual Guarantee Fund (FMG), calculated as a percentage of the amount borrowed to reimburse the loans of defaulting borrowers. A part of this participation will be paid back if the loan is repaid without incident (on average, about 0.8% of the capital borrowed + a lump sum of about 200 €). The procedure of guarantee does not require anauthenticated deed or publication at the land registry office. In case of early repayment of the loan, there are no release fees to pay, unlike a mortgage or an inscription in privilege of lender of deniers.