How is mortgage insurance calculated?

To finance a real estate project, insurance represents a significant cost behind interest. As a customer, you must be aware of how it is calculated. We give you the name of a specialized actor as a bonus in the article to save you money.

Mortgage Insurance: An Often Overlooked Detail

When a person applies for a loan to buy a house, he essentially focuses on the nominal rate to choose an offer. Banks use this rate to calculate interest. However, it should not be the only criterion to be taken into account.

The interest rate does not actually allow you to know the real cost of your credit. Other costs are taken into account: application fees, tax, taxes, borrower’s insurance. These fees can represent a third of the cost.

In an environment where interest rates are relatively low, it ismortgage insurance occupies an important place. This is why its calculation allows you to get the exact amount of monthly payments to be repaid. Furthermore, knowing how to calculate it gives an indication of the competitiveness of the offer. This allows the customer to switch insurance by playing the competition.

Is it possible to negotiate your mortgage insurance?

Faced with the proliferation of online insurance quotes, you need to take your time to choose the right quote. To do this, it is necessary to compare insurance prices and perform simulations.

Since the Lagarde Act came into effect in 2010, delegation of insurance is now possible. Before this decree, customers had to systematically take out insurance in the same group as the bank. At the moment, the latter is free to take out insurance in another institution.

However, there is one condition. It is necessary to sign a contract that provides the same guarantees as the bank’s.

Elements to consider in the cost of insurance

Insurance companies use two calculation methods to define the price of insurance:

– Either it is calculated based on the initial capital: This means that the fixed contribution remains stable during the repayment of the loan. Banks generally use this method.

– Either it is calculated on the basis of the remaining capital: This means that the contribution decreases as the repayment progresses. This method is cheaper than the first and alternative players offer it when you outsource insurance.

To define the borrower insurance rate, the company maintains several criteria in relation to:

– Your personal and professional situation: do you work in a high-risk sector? Do you play a sport that is considered dangerous? This information can increase the insurance premium.

– Your age: the insurance offers depend on the subscriber’s age. The price of insurance will not be the same for, for example, a young person under 30 and a person aged 55.

– Your property project: the price depends on the type of loan.

– Your medical situation: pathologies such as diabetes or depression affect the insurance rate. Likewise, if you have a history of high blood pressure, alcoholism, or smoking, these details can affect this rate.

How to interpret the results of an online tool?

When performing an online simulation, loan insurance calculator often offers you a result expressed as a percentage. What does e.g. a rate of 0.2%? To get the monthly amount to be paid each month, multiply it by the capital borrowed. Then you divide the result by 12.

For example, you need a financing of 100,000 euros to be repaid over 10 years with an insurance rate of 0.2%. This corresponds to a monthly payment of 16.67 euros. Knowing that a loan over ten years corresponds to 120 monthly payments, the total amount for your insurance is 2000 euros.

What might the Lemoine Act change in 2022?

Despite the application of the Lagarde law, eight out of ten customers take out insurance offered by their bank. However, it is not an obligation. They can save up to 15,000 euros by choosing a third-party insurance company.

This Lemoine Law revolves around three points:

– Option to change contract at any time.

– The transition of the right to be forgotten at 5 years.

– Removal of the traditional medical questionnaire if the credit is below 200,000 euros.

People who take out a mortgage from 1 June 2022 can benefit from this law. In the same way, those who already have a credit in progress can change insurance from September 2022.

How to find a borrower’s insurance?

Do you want to change borrower’s insurance or take out a new insurance? The procedures can dampen the envy of several customers. However, it is now possible to delegate this task to the insurance company. Your new insurance company can take care of the termination for you. Then he makes sure to open your file. With the presence of online players like Reassure me, you no longer need to go to a physical agency. This platform takes care of finding the best contract for you, but also helps you for free in all the steps.

Switching home loan insurance offers many benefits. Firstly, the delegation of insurance allows you to benefit from a more competitive price, as you can see in this table:

Borrower’s age

Bancassurance rate

External insurance rate

Between 25 and 35 years

0.22%

0.08%

Between 35 and 50 years

0.31%

0.14%

Between 50 and 70 years

0.42%

0.28%

Over 70 years old

0.69%

0.41%

Leave a Comment