How much does mortgage insurance cost?
Insurance rates from the major French banks are between 0.20% and more than 1%. If the insurance offer is not made by your bank, we are talking about delegation of insurance, the rates are rather between 0.1% and 0.7%.
To understand what this represents concretely, let’s imagine the following two situations:
- A family borrowing €100,000 over 15 years at an insurance rate of 0.25% will spend €3,750 on their insurance.
- A family also borrowing €100,000 over 15 years, but with an insurance rate of 0.70%, will spend €10,500.
The difference is more than significant, although this amount of €100,000 is a rather low loan amount. A 2021 study shows that the average amount borrowed for a property purchase was close to €200,000, and even €300,000 for residents of Île-de-France. It is easy to imagine the cost of insurance that this represents. We understand why it is important to switch insurance companies when necessary to find cheap mortgage insurance.
Why such price differences for borrower’s insurance?
The insurance company will take many criteria into account before proposing a rate for your insurance:
- The duration and of course the size of your credit
- Your age and state of health (under certain conditions now)
- Your personal and professional situation
- Possible risks related to your profession, your habits or your hobbies
The difference in rates, and therefore in costs, can also be explained by different guarantees. It is therefore necessary to check that a very cheap insurance actually provides a sufficient guarantee.
Once the insurance contract has been signed, it was until now rare to be able to renegotiate the original conditions and even more difficult to obtain a competing offer.
The upheaval of the Lemoine Act
The Lemoine Law, named after Deputy Patricia Lemoine, was voted in February 2022 and published in the Official Journal of the European Union in March of that year. This law includes several measures, especially on the protection of medical data, but one of them is particularly interesting regarding mortgage insurance.
It is now possible for any borrower to cancel their insurance without conditions and, above all, without charge. Passed with the aim of simplifying and streamlining the insurance market, this law has profoundly changed the cards. It is now possible for all those who have a current mortgage loan to renegotiate their insurance or take out a new, more advantageous one. It is important that your bank or the organization you took out your first insurance with absolutely cannot oppose your wish to switch. There is one condition that must be met, however, you must prove that the new offer made to you has the same guarantees as the previous one.
The period is therefore ideal for changing loan insurance, especially if you have taken out a policy relatively recently. The insurance’s share of the total costs has increased quite a bit in recent years, especially if you have subscribed to a bank. It was up to them to partially offset the very significant drop in mortgage interest rates.
How to find really cheap mortgage insurance?
You can feel a little discouraged at the thought of having to go to different organizations to negotiate a new insurance offer. It is not easy to reconcile the necessary procedures with family and work life. However, there is a simple solution: use a broker. With the adoption of the Lemoine law, new actors have emerged who seek the best possible offer for you among all those existing on the market, negotiate with the organizations concerned and take care of a large part of the necessary administrative procedures. The “Reassure me” page, for example, offers a wide range of services that make it easier for you to switch insurance: a standard cancellation letter, an insurance comparison, a file that opens in minutes and for free. Of course, there are other similar brokerage services that you can easily find online.
By using the services of a broker, you exempt yourself from a large part of the formalities, but you also have the certainty of benefiting from the most advantageous offers.
As you have understood, the period is really favorable for borrowers to switch mortgage insurance. The Lemoine Act provides a new opportunity that it would be a shame not to take advantage of. Renegotiating or switching insurers, by taking your own steps or going through a broker, is the surest way to make real savings on your mortgage insurance.