Financial Matters

Mortages and Insurance

Mortgages

I need a mortgage. Where do I start?

There are many different types of mortgages available, repayment, interest only, sterling, foreign currency, buy to let, etc from a wide variety of lenders - including banks and building societies. Some mortgage loan applications can even be made over the phone or via the Internet. It is even possible to apply for a homeowner loan that is secured on your home if you are trying to fund a home extension.

With so much choice you may feel that you need to seek some expert advice and use an IFA to make your mortgage loan application. All financial representatives are bound by law to give the best advice for your needs when you make a mortgage loan application. They must operate within the terms of the Financial Services Act (FSA) whether independent or tied.

Please note that for legal reasons (we are not registered to give such information) here at uk-home-information we are unable to suggest any particular mortgages, however there are many websites that allow you to compare mortgages.

We have a maximum mortgage calculator and stamp duty calculator available for you to use, these will give you some idea of the typical maximum loan available and how much stamp duty (land tax) you will have to pay. We also have some information about house repossessions.

Mortgage Protection Insurance

A mortgage protection insurance (also called a mortgage payment protection policy; accident, sickness and unemployment insurance; or given such titles as Paymentcare or Paymentcover) protects your mortgage in case you can’t work and is something you can’t really afford to ignore. You never know what life has in store for you, somebody has a heart attack every two minutes in the UK and one in three of us will get cancer at some point in our lives, so none of us are invincible and most home owners in the UK need life cover or life insurance of some sort.

So how do you go about protecting your mortgage payments? On the surface, mortgage protection insurance looks simple. Your lender will more than likely offer you a mortgage protection insurance policy, also sometimes known as accident, sickness and unemployment cover. It’s a one-size-fits-all policy that doesn’t take account of your age, gender or occupation, and it will pay your mortgage and its' associated costs, such as home insurance, for 12 months if you lose your job, suffer an illness or accident that stops you working.

But there’s nothing simple about mortgage protection insurance. To start with, your lender may not offer the best mortgage protection insurance cover. The average cost of mortgage protection insurance from lenders is £6 a month for £100 of benefit, but you can buy mortgage protection insurance from British Insurance Ltd starting from as little as £2.45 per £100 of cover per month. For more details please visit our Accident, Sickness and Unemployment insurance page.

When you move into your new house you need to consider insurance, there are two main forms of cover you should think about, buildings and contents. Home Cover Insurance provides home, building, and home contents Insurance.

Basically, buildings insurance covers the bricks and mortar, ie the general structure of the property (the walls, roof etc) and will include most permanent items that are fixed to the property, such as kitchen units and fitted bedrooms. Contents insurance, on the other hand, deals with movable household items such as furniture and personal belongings and may cover items such as frozen food in your freezer, bicycles etc.

Please note that the answers to the questions below are general. You should always read your policy document or ask your broker or insurer to check that the your insurance covers your situation.

I've heard of "New For Old Cover", what does this mean ?

Some insurance policies insure house contents on an indemnity basis which means that, in the event of a claim, the insurer will settle the claim after deducting an allowance for wear and tear. Many modern policies are set up on a "new for old basis" which, provided your sums insured are not understated (in otherwords you have not quoted too low a value for your belonings), covers your property for its replacement value at today's costs. You may find that in the event of a claim that your insurer has deals with suppliers to provide you with replacements directly, although this is not always the case and sometimes you may need to purchase the replacement items from a shop. As with any insurance policy, you should always read your policy to check for any exceptions to this rule and to check the type of cover that you have.

What is "Accidental Damage Cover" ?

With most house contents policies if you pay an increased premium you can extend your cover to include accidental damage. Typical examples of accidental damage are cigarette burns in carpets, paint spillage, or even dropped ornaments. You may also be able to extend the cover on your buildings insurance to include accidental damage at an additional cost. This extension to your buildings insurance will cover you for such things as putting your foot through the ceiling when you are in the attic or breaking a window. Ask your broker for details.

What does "All Risks Cover" mean ?

The new for old and accidental damage cover mentioned above normally relates to accidents occurring within the house but, again for an increased premium, you can buy additional cover to cover your propert when outside the house. The cover is normally on a worldwide basis and will include such things as loss or theft of baggage whilst on holiday, loss or theft of jewellery away from the home or even something as simple as losing your spectacles when away from home.

My house is worth £185,000 on the market but my building society says I only have to insure it for £150,000. Am I under insuring?

Buildings insurance is to cover the rebuilding cost of your house and its outbuildings such as a garage. it does not insure the value of the land on which the house is built or any the extra value attributed to a property because of the area in which it is situated (if the house needs to be rebuilt it is on the same land afterall). You only need to cover the cost of demolition, clearing the land and rebuilding the house. There can be exceptions of course, for example if you own a building that would need specialist reconstruction (this is the case of many listed buildings) you may actually have to insure for more that the market value of the house because of the increased cost of rebuilding the house. If you are not sure about how much you should insure for then contact your lender for guidance and speak to your broker who can assist in getting the right cover.

I have a valuable ming vase/item of furniture/oil painting/stamp collection. Will this be covered under my contents policy?

Your policy will normally cover individual items up to a value of between £1,000 and £2,000 depending on your insurer or they may give cover for a specific percentage of the overall sum insured, ask your broker when taking out the policy. For individual items that exceed the allowed values you must always specify them separately and will have pay an additional premium to cover the increased risk. Your insurer will normally want to see a recent professional valuation. It is surprising how many people fall into the trap of thinking that their valuable antique cupboard is covered under their general contents policy - only to get a nasty shock when they submit their claim form (have you ever seen the Antiques Roadshow when the expert tells the person that they need to insure the item for £10,000?). Also you need to keep up to date with changing values - your policy will usually be indexed linked to the RPI (retail prices index) but many collectible items gain value at a much quicker rate than inflation and your sum insured for valuables should be regularly reviewed.

House Buyers Guide

We have put together a brief guide to buying a house in the UK. We hope that you find this useful.

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