How to untie home insurance from the mortgage
Are you required to take home insurance in order to get a mortgage? The answer is yes. But that does not mean you must take it out with the bank that has granted you the mortgage. And if you have done so, you have the right to change it to any insurance company that offers you better conditions. We explain how to do it.
Traditionally, banks have taken advantage of the granting of a mortgage to force you to take out other products, especially home and life insurance, in most cases with uncompetitive conditions. Fortunately, the mortgage law of 2019 makes it clear that, although the financial entity can demand the contracting of home insurance, the client has the right to contract it with the company that offers the best conditions. And they can even change insurer if they wish to do so.
The only condition for changing is to wait for the annual expiry of the policy contracted with the bank. By giving formal notice two months before the expiry of the policy, the customer can indicate to the bank his or her decision not to renew the home insurance contract when it expires.
In addition, the user must present the bank with a copy of the new policy, which must include the assignment of rights corresponding to the capital that is still subject to mortgage. This is a formality that the new insurance company can help you to do correctly.
A thorny issue when changing insurance is usually the linking of the mortgage interest rate with the insurance contract with the bank. In fact, it is likely that the mortgage clauses contemplate a rise in the interest rate if the insurance is not taken out with the bank.
In this case, it is necessary to be careful not to lose out financially and to calculate how much we gain and how much we lose with the change. There can be a slight financial loss in the first years of the mortgage, when the part of the instalment corresponding to interest is very high and that of capital amortisation is very low. However, as the years go by, the impact of the interest rate becomes minimal because almost everything we pay is capital, so this coercive clause is no longer an impediment to changing the home insurance to another insurer.
Using a mortgage calculator, it is possible to find out the exact date when it is in our interest to change to another insurance company to get better conditions and price. The savings can be significant, more often than we thought so.
If you want to discover fair insurance for your home and for society, check 11Onze Segurs.
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