Mortgage
Indemnity Insurance - Mortgage Information
What
is Mortgage Indemnity Insurance?
You
pay for Mortgage Indemnity Insurance but it only protects the lender
if you can't pay back the loan. It is often compulsory if the loan
to value ratio of your mortgage is above 95% - which can hit first
time buyers. Some mortgage lenders charge it from an 80% loan to
value, other lenders don't charge it at all - although it may be
hidden and you are paying for it through a higher interest rate.
If
you don't keep up your mortgage payments and your house is repossessed
and sold for less than the money still owed on the mortgage then
the lender is insured against that loss. But the insurer may be
able to claim the loss from you many years later. Mortgage lenders
can chase debts up to 12 years old, unlike the standard 6 years
for the rest of UK businesses. Years later, after you've sorted
your finance problems out, the lenders will try and get it from
you with interest.
Mortgage
Indemnity Insurance can cost up to £1000. Most borrowers don't
realise that it doesn't protect them at all and a recent trend is
that the better mortgage lenders are starting to do away with it.
Some lenders however still make it compulsory.
How
to avoid paying Mortgage Indemnity Insurance
Some mortgage lenders don't seem to charge Indemnity Insurance -
but actually they are hiding it by making you pay a higher interest
rate or some kind of tie in. You
could check at what level of loan to value it kicks in and borrow
just below that threshold. It usually works out about £10
on a £100,000 mortgage.
List
of Major Mortgage Lenders
OCIS
provide general financial information, we urge you to consult an
Independent
Financial Adviser ( IFA )
before making any important decisions about your finances. |
