It is now possible to switch mortgage insurance
For part of the population, mortgage loans rhyme with taking out loan insurance in the same bank. However, it is not forbidden to play the competition and take out external insurance, but few do so due to a lack of knowledge. Once the insurance contract is signed, there is no going back. Fortunately, the field of insurance has evolved and it is now possible since the beginning of September 2022 to change loan insurance thanks to the Lemoine law. To get a loan insurance quote, Réassurez-moi compares for you, according to your profile, different insurance companies to offer you the best offer and allow you to make money every month on your monthly payments. The only condition to enjoy it is that the insurance company offers guarantees similar to those you had later.
Playing the competition is one thing, but it is important to understand how this insurance is calculated and what it represents for finances.
A calculation based on your mortgage
The insurance rate is calculated according to several criteria related to the loan that will be taken out, namely its size, its duration and the selected loan type.
The higher the amount borrowed, the higher the amount represented by the loan insurance. In addition, the duration of the loan also affects the amount that this insurance will represent. You pay more loan insurance over 25 years than over 20 years. There is also a variation in the price of insurance depending on the type of loan taken out.
Two calculation methods: two different costs
You should know that the insurance cost of a mortgage loan is on average 25%, sometimes more than 35% of the total credit cost, it all depends on the characteristics of your loan, but above all on the calculation method.
Banks usually calculate loan insurance in two ways:
- With the outstanding capital
- With borrowed capital
The calculation method with the remaining due capital varies the amount of insurance to be paid in relation to the amount of capital you still have to repay. In other words, the more capital you have repaid, the less insurance you pay. This calculation is interesting when you have already repaid a large part of your loan.
The calculation based on borrowed capital is the one used by almost all banks. These calculate their insurance rate based on the amount you borrow and this remains unchanged. This means that during the entire repayment of your loan, you pay the same insurance amount every month.
For example, for a loan of €200,000 over 20 years, with an insurance rate of 0.30%, you pay €50 in monthly insurance. To perform this calculation, multiply the borrowed amount by the insurance percentage and divide the result by 12.
An insurance price that varies according to personal criteria
In addition to the characteristics of the loan and the calculation method, the price of your mortgage insurance may increase depending on certain criteria.
The first of these criteria is your profile, and more specifically your medical profile. Your age, your medical history and if you smoke will all be important elements for the calculation of your insurance. Obviously, the older you get, the higher the price of your insurance.
A recent and fairly serious medical history can make it difficult to get insurance at all. And if you don’t smoke, are healthy and in a fairly young age group, your insurance will cost you a fair amount.
Banks also need to know your trade to know if it is risky or not. In fact, some jobs pose daily risks to health or life. By lending you money, the bank wants to cover itself against a possible risk of not being paid in connection with your business. The following are considered high-risk occupations: firefighters, soldiers, police officers, truck drivers and even farmers.
Recreational sports are also of interest to financial organizations because they can be risky for health. If you are a fan of diving, extreme sports, climbing or skydiving, you must inform your bank or insurance company so that your loan insurance can be adapted to the risks that arise.
Many criteria influence the price of home loan insurance, you need to know it and be aware of it in order not to be surprised. Currently, we observe rates for young profiles around 0.07% (in insurance delegation), which can go up to 0.95% for senior profiles. Thanks to the Lemoine Law, you will be able to obtain loan insurance quotes and choose the one that suits you best.