Home loans: how much can you save by switching borrowers’ insurance?


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Borrower insurance protects against the risk of no longer being able to pay the installments on your mortgage loan. The Lemoine Act allows you to cancel your insurance policy at any time. How much can you save by switching borrowers’ insurance?

How does loan insurance work?

Borrower’s insurance gives those who take out a mortgage the opportunity to protect themselves against the risk of no longer being able to pay back the installments on their loan. The insurance company covers the remaining capital in the event of death, illness, invalidity, inability to work, loss of employment.

The borrower is free to choose his borrower insurance: he can take out the lender’s or take out one from another institution, provided that the guarantees are at least equivalent to those offered by the lender.

The Lemoine Act then allows him to terminate his insurance agreement at any time as soon as the loan offer is signed and replace it with an alternative offer with similar guarantees.

What is the benefit of switching borrowers’ insurance?

Magnolia.fr, home loan insurance comparator, calculates every month the number of additional square meters that it is possible to acquire in the 20 largest French cities by changing the loan insurance.

According to Magnolia.fr, a first-time buyer aged 25 to 35 who borrows 200,000 euros over 20 years at the nominal interest rate of 2.20% (average interest rate in October 2022) would obtain an average interest rate of 0.34 for his borrower’s insurance. % with his bank. He could achieve an average rate of 0.11% by competing and choosing delegated insurance. The cost of insurance would therefore fall from 13,600 euros to 4,400 euros, a saving of 9,200 euros.

A couple aged 35 to 45 who together borrow the sum of 400,000 euros over 20 years at the nominal rate of 2.20% will receive from their bank an interest of 0.50% on each head (average bank interest for this profile), i.e. a total cost. of 80,000 euros. By choosing delegated insurance he could achieve a rate of 0.13% on each head and would save €59,200.

The profit obtained thanks to the delegation of insurance is all the higher, since the borrowed sum is important, because the price of the mortgage insurance is calculated on the borrowed capital.

In the second example, the gain would make it possible to buy an additional 5.7 m2 in Paris, 11.6 m2 in Lyon, 12.2 m2 in Bordeaux, 16.3 m2 in Marseille or even an additional 44.41 m2 in Saint-Stephen .

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