What does a borrower do when they realize that rates have dropped since they took out their loan several years ago? He bites his fingers… or he decides to renegotiate his mortgage. This poses a subsidiary question: what consequences for his loan insurance?
Low interest rates set the stage for renegotiation
It would be a shame to let new homebuyers take advantage of the extremely favorable mortgage conditions alone! Because in 2019, rates fell to 1.12% on average according to the Housing Credit Observatory / CSA, while this figure stood at 1.43% at the start of the year. A lower rate is a lower cost of borrowing and therefore a financial gain for the borrower!
Credit and insurance, two separate rates
The addendum to the contract resulting from a renegotiation of the mortgage rate contains the arbitration chosen by the buyer: reduce the monthly payments or the repayment period. Whatever his choice, it has no undue impact on home loan insurance, which will adjust according to the new schedule, keeping its initial specific rate. It must be clear: renegotiating the loan is not linked to that of borrower insurance. However, it is possible to activate another lever, in parallel or independently, to benefit from cheaper loan insurance: insurance delegation.
Loan insurance, another source of savings
At the time of taking out a mortgage, in the “euphoria” of the acceptance of his file, the borrower generally cares little about the conditions of loan insurance. And he is wrong. He certainly has extenuating circumstances: the fear of being “out of time” for the signing of the final act, the stubborn idea that he must take the group contract of the lending institution so as not to offend him… And yet, the law is on its side: it can bring competition from the subscription thanks to the Lagarde law of 2010, it can even change at any time during the first twelve months since the Hamon law of 2014… and on each anniversary date via the Bourquin amendment of 2018!
Insurance delegation, leverage is struggling
Insurance delegation = cheaper? It is a reality: the individual contract offers tailor-made conditions where the group contract imposes standardized guarantees. Except in special cases, borrower insurance by delegation is therefore more attractive, but the best is to contact a loan insurance broker to take advantage of the competition and benefit from the offer most suited to your profile. And that, loan renegotiation or not!
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