The link, that is, the mandatory contracting of other financial or insurance products in an obligatory way for the granting of a mortgage or for it to be done under certain conditions has radically changed since the approval of Law 5/2019 regulating contracts of real estate credit.
One of the most important points of this legislation is that it prohibits the sale of linked services as long as they are mandatory, but it still allows it to be done on an optional basis as long as a non-linked alternative is presented and the customer has the option to choose.
But it must be taken into account that there is still compulsory insurance, insurance against fire or damage, which covers the continent, and, in addition, the financial institution may require that insurance be contracted that improves protection. A very common case is life insurance that adds additional protection against default in the event of the death of the owner or owners. You can also extend fire insurance protection to home insurance that covers other contingencies. What happens in these cases?
Freedom of choice of the insured
In these cases, the financial institution is allowed to require the contracting of this type of insurance, but not to oblige it to do so with an insurer linked to the financial institution.
The consumer has total freedom to choose the insurer with which to contract these insurances and the bank is obliged to accept alternative policies from any other insurer, without the bank being able to worsen the conditions of the mortgage.
This freedom to choose with whom you contract the policies will allow you two things:
To be able to compare between different companies and thus choose the cheapest insurance.Having the ability to negotiate with the bank to the extent that if they accept your offer, they will be able to obtain a consideration such as improving the interest rate on the loan.
In addition, we must never forget that the bank must always accept the policy as long as it has adequate coverage, for example, in life that covers the outstanding debt. Therefore, the management of these types of insurance that the bank requires must be active, and in the event that it rises from one year to the next we can change the insurer again, since we are certain that the financial institution will accept the change.
With regard to accepting a link that involves a drop in rates, we must always take into account the particular situation of the mortgage: interest rates, amount and term.
The higher the three, the more profitable it is to have a link. Therefore, at a time when one of the three variables, the interest rate is very low, it is generally less interesting.
Mortgages in large cities with high amounts and terms are as a general rule more susceptible to profitable bonding than those in small cities and towns. But it is especially so at the start of the mortgage, which is why, again, the ability of the consumer to renounce this connection when they want is so important.
In short, if you are going to take out insurance with your mortgage, whether mandatory or optional, the consumer is the one who has the last word.
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