When you sign a mortgage loan, all attention is focused on the rate negotiated with the bank. However, another line in the contract can increase the bill by several thousand euros and most borrowers miss it completely.
For weeks, future owners compare offers, monitor rates and try to get the best monthly payment possible. For Alexis Godard, general manager of Exell Crédit, this error is almost systematic. “Borrowers focus almost exclusively on the credit rate,” he explains to us. Indeed, in a market where rates have increased significantly, all attention is now focused on this figure: 3%, 3.5%, sometimes more. Comparators, brokers and banks all play in this area. As a result, borrowers consider that most of the negotiation comes down to a few tenths of points earned on their credit.
However, this obsession with obtaining the lowest rate sometimes masks much greater savings elsewhere. By putting another element into the balance, “the financial stakes are often more important than a slight gain on the interest rate“, explains Alexis Godard to the Journal des Femmes. According to him, many individuals think solely based on their final monthly payment without looking at the real overall cost of the loan over 20 or 25 years. In fact, by activating this lever over the total duration of the credit, “we regularly see savings of tens of thousands of euros”confides the professional.
This largely neglected element is borrower insurance. Mandatory for obtaining a real estate loan, it remains relegated to the background in most cases. “However, it is an expense item that can represent up to a third of the cost of credit”recalls Alexis Godard. The paradox is that this line of the contract is often addressed at the very end of the process, when buyers want to complete their financing quickly. As a result, few of them really take the time to compare offers or measure their impact on the total cost of credit.
He also cites the recent case of financing of 410,000 euros. With the borrower insurance initially offered by the bank, customers had to pay 140 euros per month in addition to their monthly credit payment, which represented a total of 42,000 euros over the entire duration of the loan. After studying their profile and putting contracts into competition, another insurance offering an equivalent level of coverage was selected. The monthly contribution then fell to 83 euros. Result: the total cost of insurance was reduced to 29,000 euros, or 13,000 euros saved on the overall cost of financing.
Note that many still imagine that certain lines of the contract are frozen. In reality, the regulations have recently changed and give customers more freedom. As the professional explains: “The law has evolved several times to now offer the possibility of changing at any time during the life of the credit.” The opportunity to review your contract and take a look at this very specific line.
