If the interest rate curve bends, the insurance rates required by banks do not decrease. With very low wear thresholds, the path to mortgage is sometimes fraught with pitfalls.
Expensive borrower insurance for seniors
With mortgage rates at their lowest point in history, as the Housing Credit Observatory averages 1.20% in July, it would be good to believe that borrowing has never been so open until now. However, depending on the profile of the credit applicant, the situation is quite different, especially for seniors. Indeed, it should not be forgotten that the insurance obligations are more restrictive for older people who wish to borrow a loan.
Due to a risk of death that increases with age, banks are more demanding when it comes to financing a senior real estate project since they must study the best solutions if they want to guarantee the recovery of the capital loaned during the repayment phase.
For that, the files can lead to an unblocking if in exchange the borrowers subscribe to a quota of 100% for each head. This choice consists in ensuring the entire reimbursement by the insurer in the event of the death of one of the two borrowers, which means that the surviving spouse will no longer have to pay the monthly payments.
However, setting loan insurance to 100% for each person drastically increases the insurance rate and its overall cost within the credit. Seniors may even have a loan proposal where the insurance rate approaches the interest rate. And in the absence of strong coverage, banks are likely to refuse to release the funds necessary for seniors, even with a quality file.
The rate of usury limits access to mortgage
Another problem and not least, when the insurance includes a high quota, the APR, that is to say the addition of the interest rate, the insurance but also the fees and deposit, can exceed the threshold of the rate d ‘wear. In this case, the lender is obliged not to finance the request since usury is the maximum legal rate applicable to a credit offer. For seniors, the drop in rates, even exceptional, may not be enough to compensate for high borrower insurance which takes off the APR above wear and tear.
Given that the monetary policy of the Best Bank is to prohibit the practice of high interest rates via the usury rate mechanism, it can however lead to a perverse effect with the exclusion of certain profiles, in particular the most borrowers elderly, who have no recourse for their housing project.