Mortgage loan insurance protects the borrower from the risk of non-repayment of maturities related to death, loss of autonomy and disability. It is also a guarantee for the lender, which ensures to be reimbursed in the event of default by the insured.
But is it legally compulsory? Can we make a mortgage without ITT insurance or death for example? Are there other solutions to get a mortgage without insurance? Here is our lighting.
Is borrower insurance compulsory?
From a strictly legal point of view, mortgage insurance is not compulsory. Indeed, no regulatory text imposes it on the borrower. But in practice, it may seem so.
Indeed, most banks do not grant mortgage without cover. They thus protect themselves from potential non-reimbursements. Borrowing without insurance is difficult, but not impossible. There are several solutions to take out a home loan without “compulsory” insurance, which we discuss later on this page.
Moreover, until the Lagarde law of 2010, the borrower had no other choice but to take out the insurance offered by his bank. From now on, you can opt for coverage with an external insurer, as long as the guarantees are at least equivalent to those requested by your lender.
Delegating your mortgage insurance to an external organization allows you to make significant savings. To change your contract, you must already find your new coverage. Our advice: compare market offers via our comparator. By putting the different insurers in competition, you will get personalized and attractive quotes. Our comparator is 100% free and anonymous!
Can we make a mortgage without borrower insurance?
Home loan insurance is not made compulsory by law, but it is often said that it is made by banks. It is true, most lending organizations condition the granting of credit to the subscription of insurance.
The ITT guarantee is not compulsory for all borrowers: obtaining a mortgage without ITT insurance is quite common in the case of rental investment. On the other hand, a mortgage without death insurance is more complicated, whether for a residential purchase or a rental investment.
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But depending on the profile, some banks may agree to make a loan without borrower insurance. For that, you will have to knock on several doors, do not stop at the first refusal!
Banks for which borrower insurance is not compulsory provide other more or less heavy guarantees to limit the risk of default.
What solutions to obtain a mortgage without insurance?
If they do not require the subscription of borrower insurance, banks still like to have the certainty of obtaining repayment of the amounts loaned. One solution is the uninsured loan with a mortgage, but it is not the only one. Here are the 3 alternatives to make a mortgage without insurance:
- Collateral : this practice consists of using movable property, real estate or a financial investment (such as life insurance) as guarantor of the loan. The loan amount is up to the value of the borrower’s assets.
- The caution : as in the context of renting an apartment, a person acts as surety or guarantor of the mortgage. If none of your relatives wishes to act as guarantor, you can call on mutual guarantee organizations, in return for a monthly contribution called “guarantee commission”.
- Mortgage : the loan without insurance but with a mortgage is particularly recommended for borrowers with substantial real estate assets. Please note, the loan cannot exceed half of the mortgage value.
The mortgage is a rather complex practice, the banks remain cautious about putting this type of guarantee in place. In addition, we must be very careful: a default of repayment leads to the loss of the total property of the borrower.
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How to reduce the cost of borrower insurance?
Your real estate project is progressing, you are about to take out a loan, but are not convinced by the borrower insurance offered, nor by the 3 alternatives mentioned above.
If you are not considering mortgage insurance because of its cost, know that it is possible to reduce it significantly, in particular thanks to the delegation of insurance.
Thanks to the Lagarde law of 2010, you are no longer forced to choose your bank’s cover offer: you can delegate your insurance. By opting for an external contract, you will systematically save money: prices can drop from simple to triple! The Hamon law allows you to change your contract anytime during the first 12 months of the offer. Then, you can cancel each year on the due date thanks to the Bourquin amendment.
The best way to find an advantageous contract is to compare the contracts in the market. You can also be accompanied by a broker to be sure to choose the best mortgage loan insurance.
FAQ
To borrow without insurance, you can check with your bank whether collateral, mortgage or even surety are possible alternatives.
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There are organizations that provide unsecured personal loans. On the other hand, getting an unsecured home loan is much more complicated.
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