Domiciliation of salaries, loan insurance, or even taking out internal home insurance: the signing of a mortgage loan is often accompanied by several requests from the lending bank. If you don’t have to accept… you’re often stuck.
This is a situation that may seem familiar to you if you have recently taken out a mortgage loan from a banking institution: during your first appointment with the adviser, many things are discussed, except the loan in question. As the discussion progresses, more or less formally, the bank explains to you that you will have to agree to certain actions.
Domiciliation of income, borrower’s insurance, shares or even home insurance… As many products as the lending institution offers the borrower. And very often, the latter has no other choice but to accept.
In France, there is no right to credit as there is a right to an account
When taking out a mortgage, there is an unbalanced balance of power between the lender who has all the powers against a candidate for the loan who has a very important project, considers Aurlien Soustre, member of the Financial Sector Advisory Committee (CCSF). It should be remembered that in France there is no right to credit as there is a right to an account. Even if you are solvent and meet a certain number of criteria, there is no no establishment that is obliged to lend us money. This means that the borrower finds himself in a situation of weakness and is ready to accept anything in order to be able to borrow money.
A commercial negotiation
The bank can refuse you a home loan without justifying its refusal, abounds Mal Bernier, spokesperson for the broker Meilleurtaux. Paradoxically, the bank cannot legally require the borrower to direct the income or subscribe to other products. So you are under no obligation if you take out a loan.
With regard to direct debit, after an attempt at supervision in 2018, the Pacte law which came into force at the end of May 2019 has reset the counters: from now on, bank direct debit must be integrates commercial negotiation. Most of the time, this point is settled informally, during discussions with your banker. Your contract may, however, provide for the domiciliation of accounts, in return for an individualized advantage, notes Olivier Gayraud, lawyer for the association Consumption Housing Living Environment (CLCV).
The problem is that the rates are not public
The bank can therefore promise you advantages, such as a preferential rate, if you domicile your accounts with them. The problem is that the rates are not public, points out Aurlien Soustre. So the bank may well offer you crazy conditions and then pretend to lower the rate if you subscribe to the products it offers. Real estate credit is a product with little transparency.
The same goes for borrower’s insurance and home insurance. According to conomie.gouv, the bank can offer a contract with a partner insurer, but the borrower remains free to contact the insurer of their choice.
A bank certainly cannot force you to take out borrower insurance, confirms Olivier Gayraud. You have the right to refuse and choose another. But very often, the account manager will play on the sensitive chord of mutual trust and the desire to build a global relationship in order to encourage you to accept these products. If you think a denial might prevent you from getting the credit, take it, advises Olivier Gayraud again. You will have change it all the time.
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The borrower is not a prisoner
Why then this eagerness of the banks to offer you all this? The answer is above all financial: if the mortgage always brings money to the bank, the additional subscriptions make it possible to generate additional income. The domiciliation of income responds to a double logic, also details Aurlien Soustre. The first is commercial: an active customer, who has means of payment and who carries out banking transactions, brings money to the bank. The second thing is that with direct debit, we also secure incomewhile if they are in another establishment there may be rats.
Having a global vision of your resources also allows the bank to offer you other financial products, in particular to invest your money, or conversely to find solutions with you in the event of difficulty, such as a period of unemployment for example.
Once the real estate loan is signed, the balance of power is reversed: the borrower can quickly decide to look elsewhere. In fact, today we can say yes to everything without being impacted for a long time, recalls Mal Bernier. Whether it’s home insurance or borrower’s insurance, you can leave quite quickly. Indeed, home insurance can be changed every year, while borrower insurance can, since the entry into force of the Lemoine law on June 1, 2022, be terminated at any time.
Real estate credit: what should we expect for the return?
If the borrower sometimes has the impression that the bank takes advantage of his weakness to force him to subscribe to products, everything may not be thrown away. It’s not a bad thing to have details of your bank’s home insurance guarantees, explains Olivier Gayraud, for example. Banks have been doing insurance for a very long time, and sometimes they offer very good guarantees. The borrower must not refuse everything outright on the pretext that it is the bank that is offering it. According to him, it is a very bad calculation to only look at the cost. Sometimes it’s better to pay a little more for a contract that covers better. Especially if the signature of this contract allows you to obtain the expected mortgage.