Seniors also benefit from the sharp drop in mortgage loan rates.
Rates around 1% for mortgage loans over 15 years or less
The drop in credit rates is an opportunity to afford real estate at a lower cost. Indeed, this indicator is what constitutes, in part, the price to be paid following a financing agreement from a banking establishment. During the month of May, lenders were making offers of housing loans with an average interest rate of 1.29% regardless of the duration defined. A record threshold that had never been reached before since the previous lowest rate was 1.33% in November 2016.
And the rates granted can be even lower depending on the repayment tenure determined. The shorter the years, the lower the cost of credit too. Concretely, the average rate over 25 years is 1.42% whereas it decreases clearly to 1.20% over 20 years and it even manages to get closer to below 1% over 15 years with 1.02%. For borrowers who receive high income and who hold assets, it would be interesting to favor a shorter repayment period in order to benefit from a better mortgage interest rate.
Loan insurance can drive up the cost of credit
Due to a more advanced age and a heritage which has sometimes had time to accumulate, the elderly are a type of borrower who often turns to shorter credit periods. In this case, they are fully eligible for the lowest rates and the banks have no real fear of lending them. Indeed, seniors earn fixed incomes and their financial situation is less subject to change than an active worker.
Now, banks are protecting themselves from the risk of non-payment by asking for loan insurance. It comes to guarantee the amount of the mortgage in the event of death during the amortization phase of the borrower. If it is not legally binding, the banks condition a financing agreement if the loan is accompanied by such cover. This requirement is all the more real for retirees who are more exposed to the risk of premature death. If the short repayment periods selected by the seniors will make them benefit from extremely low rates, they will therefore have to be vigilant with regard to the cost of borrower insurance since the premium is much higher than for the youngest.
Find a better guarantee with the loan insurance delegation
If the cover offer previously signed does not meet expectations in terms of conditions and cost, a senior may apply for delegation of borrower insurance by proceeding two months before the anniversary date of the edition of the loan offer. During this period, it is advisable to make several insurance quotes in order to identify the best coverage offer. The bank cannot refuse a delegation, but the borrower must nonetheless bring in minimum conditions similar to the initial contract.