Is borrower’s insurance compulsory to buy a home?2 min read
In order to guarantee the repayment of the sums remaining due, in the event of death or disability, banks generally require the subscription of a borrower’s insurance. It is often preferred to other guarantees.
Is borrower’s insurance compulsory to buy a home?
Borrower insurance is essential to have your credit
The lending institution generally requires the borrower to take out insurance intended to guarantee, in particular in the event of death, disability or unemployment, either the total or partial reimbursement of the amount of the mortgage loan remaining due, or the payment of all or part of the installments of the loan. It is the lender who sets the minimum guarantees that this insurance must present.
To this end, the lender may offer group insurance membership . The borrower also has the possibility of subscribing with the insurer of his choice, an insurance equivalent to that offered by the lender. The lender cannot refuse another insurance contract as collateral if the proposed contract offers a level of guarantee equivalent to the group insurance contract.
Before subscribing to the contract, the insurer asks you to complete a health questionnaire which allows you to adjust its rate to your personal situation.
What to do if you are refused borrower insurance?
If you are ill or have been ill and present a higher than average risk of disability or death, you risk seeing one or more refusals of insurance. In this case, you can request the application of the AERAS convention (insure and borrow with an aggravated health risk) which obliges the insurer to process your request by applying several levels of analysis as well as to apply a right to oblivion or a reference grid.
The implementation of the AERAS convention does not oblige the insurer to accede to your request. For this reason, the banks have undertaken to accept other guarantees. This can be a surety bond or the taking out of a mortgage on another piece of real estate that you own. The lender may also offer to pledge a life insurance policy or even pledge a portfolio of securities.
Exemption from property tax
In some municipalities, the property tax is not required in the event of the purchase of new housing, whether as a main or secondary residence and the owner occupies or rents the property. The tax exemption lasts for two years after the completion of the construction of the property.
Reduced notary fees
By setting your sights on a new home, you can take advantage of much lower notary fees than for an old home. Indeed, in the old one, these are between 7% and 8%. By way of comparison, in new buildings, notary fees fluctuate between 2% and 3% of the purchase price.
This is notably due to the fact that the majority of notary fees (80%) are paid to the State in the form of taxes… Taxes which do not apply to new real estate and are not taken into account in the cost of acquiring a new property.