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What are the mandatory guarantees for a home loan?

What are the mandatory guarantees for a home loan?

Applying for financing, whether it is a home loan, an auto loan or others, is sometimes complicated for those who are not used to it. Banking institutions think above all about protecting themselves against delays and payment defaults. To this end, they impose more or less restrictive conditions on the subscription of a loan. To do this, banks require the subscription of certain guarantees before granting credit. But are they really compulsory and, if so, at what cost?

Mortgage loan: non-compulsory guarantees but!

In the eyes of the law, there is actually no collateral required to take out a loan. On the other hand, the task is complicated on the side of the banking establishments. In the context of a mortgage application which usually involves a large amount, it is quite normal for the bank to take measures to protect its investment. By agreeing to finance your real estate project, the lender is exposed to several risks.

Even if you can prove that you are quite able to afford the monthly mortgage payments without any worries, you are not considered a zero risk borrower. In life, no one is immune to the unexpected: job loss, health problem, family problem, etc. Indeed, several situations can compromise the ability of a borrower to meet its financial commitments.

What is borrower insurance?

In addition to checking the repayment capacity of a borrower sparingly, some banks make it clear that borrower insurance is considered essential to obtain a mortgage. However, depending on the price charged by your insurer, be aware that under the Lagarde law, the Hamon law and the Bourquin amendment, nothing prevents you from using a private insurer who would offer a better offer.

Sometimes, it is possible to save up to 50% compared to the offer offered by your bank! Out of the total amount of your mortgage insurance, it may be several hundred euros that you will be able to keep in your pocket. All your lender asks is that your credit be insured, and it doesn't matter whether it's at their home or at another institution.

What is death insurance?

Like borrower insurance, death insurance is not compulsory. However, no credit institution accepts to grant a mortgage without this type of insurance, regardless of your financial situation. And this is once again understandable. Moreover, the older you the borrower, the more difficult it will be for him to access a mortgage.

In addition, this insurance is actually much more advantageous for the borrower or rather his family than for the lender. In the event of death, it will be up to the bank to take charge of the rest of the maturities. Without such coverage, the family of the deceased would have to take care of the payment of the remaining monthly payments, which can cause them real problems, or even force them into debt.

However, if you refuse to take out insurance for your mortgage, some banks may be accommodating and will be likely to accept your loan application, provided that you agree to pledge instead. That is to say that you agree to sell real estate in the event of non-repayment of your credit.

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