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If you own a flat, it is more than likely that you also have a mortgage to cover the cost of the purchase. In fact, a large part of our salary usually goes to this expense...
When taking out a mortgage at any bank, we are usually offered other complements to cover other situations: home insurance, life insurance... This used to be very common, not as a voluntary complement, but as something necessary to formalise the mortgage in full. Well, you should know that with the new Mortgage Law the bank cannot impose its insurance on you when you take out the mortgage. For example, taking out a life insurance policy through the bank can prove to be a very costly and time-consuming between a 30% and a 50% more expensive than with an insurer , or even exceed it. These data are based on a study carried out by INESE and the consultancy firm Global Actuarial. To avoid contracting something that neither interests you nor is worth it, read on.
Why do banks force us to take out insurance?
Banks usually offer us to take out their insurance policies because it is usually a way of guaranteeing that, in the event of any unforeseen event, can recover the money from the loan granted. By having one or more insurances attached to the mortgage, such as pension plans, mortgage life insurance or home insurance, what is done is that ehe bank guarantees its benefit in the event that something should happen to the owner through life insurance (as the bank appears as beneficiary) or if something should happen to the property, through the home insurance. In this way, the bank gets to insure its investment, always.
Under the new legislation, the bank can oblige you to take out a life or home insurance policy, but what it cannot do is impose you to be with them.. You can search and select the ones you are most interested in, with the best conditions.
What to bear in mind when taking out these insurances
If we negotiate a mortgage with the bank and have to take out additional insurance, it is in our interest to do so consistently and with guarantees.
Home insurance
We must be clear about the cover contracted. On most occasions, if we take out home insurance with the mortgage, we find that the coverage is only associated with the building.
As noted above, the bank seeks to offer insurance that benefits them. Therefore, their interest is to protect the property, not what is inside, which is your belongings. You should be clear about what kind of coverage the insurance offers and that it covers not only the structure but also what is inside.
Life insurance
In this case, we must identify the capital and the coverage to be taken out. In other words, what money I should invest and what it will cost me, and what it will cover. Normally, and according to the aforementioned study, life insurance policies associated with mortgages usually only cover death. We should know that for a coverage of 120,000 euros, it has been proven that the cost increases between 32% and 42% with the bank.
Bear in mind that you cannot be obliged to take out certain types of cover and the same applies to capital. Analyse what you need in order to guarantee your security and that of your family, and take out what protects you and benefits you in equal parts.
Novelties of the Mortgage Law
As we have indicated, these changes are motivated by the new Mortgage Law. This is contained in Law 5/2019, of 15 March, regulating real estate credit contracts, in which we can find three important novelties:
- The individuals who take out the mortgage are no longer charged Stamp Duty (Impuesto de Actos Jurídicos Documentados).
- Notary, registration and agency fees are borne by the bank and not by the buyers as before.
- And the mortgage may not be associated with other products sold by the bank, although they may require it to be taken out. In this case, as we mentioned, they may require home insurance, but they cannot impose the provider.
With these changes implemented, at Moné we want you to get the best benefits for you when taking out your mortgage. If you take out insurance, don't be afraid to compare and look for those that are most suitable. We can help you to find the best home insurance and life insurance to enjoy your new home without any headaches.
