A case that often comes up and for which many of you contact me: Can I borrow if I am sick?
I had the case this morning of a lady who is looking for loan insurance for her son. His son is currently on sick leave and for the moment the loan insurance of the bank grants him only the guarantees Death, Total and Irreversible Loss of Autonomy and Disability. The incapacity for work guarantee is refused. Since he buys a principal residence and must be able to compensate for the loss of income if he is on sick leave (to be able to continue to pay his monthly loan maturity), the bank refuses to grant him his ready.
Does the bank have the right to refuse to lend you if you are not covered for the work disability benefit?
Only death guarantees and total and irreversible loss of autonomy are mandatory for real estate loans regardless of the type of investment made. But then, depending on whether it is a main residence, a second home or a rental investment, the criteria of guarantees requested evolve and are reserved for each bank.
Some banks will be more flexible on the additional guarantees to be subscribed (total and partial incapacity for work, total and partial permanent disability, option back and psy disorders with or without condition of hospitalization …) others firmer. Each bank has its own criteria depending on the investment made. For information, you will find in our page by clicking here, the guarantees required by the main banks for an investment for a principal residence.
The death and total loss of autonomy guarantees are reserved mainly for rental investments because in this case, the borrower’s income is guaranteed by the rents he will receive (at least in large part). We are seeing more and more banks that also require the disability guarantee for rental properties.
For a principal residence, the death and loss and irreversible benefits of autonomy will almost always be accompanied by disability and work disability guarantees. Certain profiles of borrowers already having a large real estate patrimony or significant savings may sometimes be exempted from subscribing to the disability and disability guarantees, but the final decision is reserved for the sole assessment of the bank that will grant them the loan.
A little parenthesis to understand why the bank claims all these additional guarantees. The bank tries to make sure that loan maturities will continue to be paid if you lose half of your salary. Indeed for an employee, in most cases, the social security pays you only half of your salary when you are sick and this for a maximum of 3 years (then if you still can not return to work, social security will switch you into disability and it is the disability guarantee that will take over to pay the credit maturities). For a liberal profession or a self-employed worker, the daily allowances paid by the health insurance can even be lower than 50% (it depends on each general scheme on which depends the profession, it is thus necessary to inquire on a case by case basis). The Bank is therefore seeking to ensure that you will be able to continue to repay your credit maturities.
What alternatives are available to you if you buy a principal residence and the additional disability and disability benefits are refused?
Use the insurance delegation
In the first instance, we advise you to have your file reviewed by an insurance company other than the bank: some insurance companies are more flexible than others to insure people with an aggravated health risk, contact us, we will guide you to companies that can assure you, depending on your pathology.
Moreover, for many pathologies, and as soon as you enter into its criteria of application, the AERAS Convention makes it possible to push back the limits of the insurability of the people who present / have presented an aggravated health risk.
Note however that in this case, where the person is still off work, the insurance will not have any perspective on the consequences of the judgment, it is then possible that it adjourns its decision, proposing re-study the file, once the person has resumed his activity.
See if you have a professional pension plan
Secondly, if no insurance has agreed to insure you, contact your employer to see if you have a pension plan that insures you to supplement your salary in case of sick leave. This is a negotiation to do with your bank because it can consider that if you get fired, then you will not have this foresight … But it’s worth a try because I saw a lot of cases in which the contract is an acceptable argument by the banks. And among other things when the borrower is an Unpaid Worker who had already subscribed to his own foresight when he was in good health. In this case, the borrower is his own employer, so there is no risk of dismissal and if the activity is sustainable (what the bank knows since it has agreed to grant you the loan), it There is no risk of filing for bankruptcy either.
Try to bring other guarantees to the bank
Thirdly, if you do not have a provident contract or if the bank refuses to take it into account, there will still be the possibility of taking another guarantee such as the surety of a relative for example or the pledge of life insurance or other savings product. You can also offer the bank to take a mortgage on your property, if the main deposit is another deposit type Credit Housing for example.
Contact other banks
Finally, if none of the previous solutions are accepted by the bank, then we must consider changing banks and find one that will agree to lend you with one of these solutions. We can help you go around the banks to see which one will eventually be able to finance you. Do not hesitate to contact us.
It may seem unfair to you in a sense that the bank does not agree to lend you while you are on sick leave, but do not forget that these loan granting criteria are there to protect you as borrower than your bank. It is therefore very important to embark on the project of a principal residence purchase while being well protected. Unfortunately, too often, in my daily work, I see people whose lives change from one day to the next because a big illness comes to strike them, their salary falls by half if they do not have a supplementary pension next to it, and have to managing money problems at that time to protect his family does not allow him to devote himself fully and serenely to his recovery.
Once again, do not hesitate to contact us, we will make every effort to help you and try to find a solution together.