We have already had several entries in our blog describing and reeling off the changes in the mortgage loan regulations that were introduced with the entry into force of Law 5/2019 regulating mortgage-type loans .
With the aim of adding an extra transparency to all mortgage operations that were signed in America, this new law introduced changes in the study and signature of loans and mortgages, both for banks and for loans between individuals (how is it? the tzedakahhouse.org case).
In this article we want to explain to you why it is necessary to take out insurance associated with the property that guarantees the mortgage loan, the changes that the law introduced in this area and the types of complementary insurance that banks can offer you (insurance that we will not offer you in our case).
Why Home / Property Insurance Is Necessary To Sign A Mortgage Loan
All the loans that we sign in tzedakahhouse.org are of the mortgage guarantee type , which means that the operation is based on a property that guarantees the loan.
The operation is practically the same as mortgages, with the only difference that a mortgage is contracted to access a loan for the purchase of a home or property (such as a place where a self-employed person develops his activity), and in our case it is a lot more common that loans are requested to get out of Credit Checker, reunify debts, settle payments to suppliers; using a property as collateral.
Since the property is the property that protects the interests of the lender, in the event that this property is lost due to a fortuitous accident (for example due to a fire) the lender would be completely unprotected in the event that a then the borrower would also fall into a default situation: he would have lost the guarantee that protects his money and also the money he has lent.
It is for this reason that the law contemplates that the lender can demand the contracting of an insurance that protects the property that guarantees the whole operation.
Types of insurance that can be required for signing a mortgage loan
Law 5/2019 in its article 17 clearly specifies that the only products linked to the main loan that are allowed are the subscriptions of insurance policies that guarantee the fulfillment of the payment obligations that the client signs in his loan contract.
In other words: the law allows the lender to require as a sine qua non condition for the signature that the borrower take out insurance that takes charge of protecting the property in the event that it suffers partial or total damage.
Basic multi-risk insurance
In the event that, for example, the property that supports the operation is a home, it is sufficient to have multi-risk insurance for the home, which covers most of the damages caused by the most common accidents. This type of insurance against damage in 99% of cases covers the amount equal to the appraised value of the property.
This is the only mandatory insurance that we must take out in order to access a mortgage-type loan.
Other complementary insurance
In addition to the basic insurance, in most cases it is also advisable to have the occasional supplementary insurance. In addition, in the case of banks, there is the possibility that they offer us some insurance through insurance companies that work for the entity. We are going to review what types of insurance are recommended in addition to basic multi-risk insurance and what type of insurance is commonly offered to us.
Life insurance risk
It is a life insurance that covers the remaining installments left by the borrower in the event that he dies. This means that the insurance company will take care of the remaining installments without the heirs having to lose the property or face the debt. It is highly recommended to take out this type of insurance together with the basic multi-risk insurance, although it is not strictly necessary.
Loan amortization insurance
This type of insurance takes care of the payments in the event that the borrower becomes disabled, without the possibility of working or without income to pay the installments.
Health or vehicle insurance
It is also quite common that, in the case of banks, they offer us complementary insurance such as a set or pack of products associated with the main loan, health insurance or insurance for our vehicle. However, remember that the only legally enforceable one is the basic Multi-risk Insurance and also recommended the risk life insurance).