Mortgage Indemnity in Hampshire
When it comes to taking a mortgage, one of the things your lender will want to know is if you can keep up with monthly payments even when the rates change.
For this reason, many lenders include a mortgage indemnity insurance as one of the conditions for borrowing money. This is usually the case if you are taking a loan higher than 75% – 90% of the value of your home.
It is safe to say, that although you pay for it, your lender is the one who benefits most by this plan; hence the name, mortgage indemnity.
But not every case requires one, and when you do, it is important to understand the details of the agreement. How much should you pay? When does it become necessary?
This is where an expert adviser comes in. At Re-mortgage Fast, our team provides guidance and advice for mortgage takers who want to get the best out of their contract. From mortgage advice to loan applications assistance, we make the process completely hassle-free.
Need help with a mortgage indemnity in Hampshire? Call 02380 970979 to talk to a representative today.
How does a mortgage indemnity work?
A mortgage indemnity is designed to reimburse your lender if you borrow a high percentage of the value of your property (usually >75%), and can’t continue with payments. Approximately, 66% of mortgage lenders will request a mortgage indemnity premium when you borrow at this level.
If you fall behind on your monthly payments, your lender is well within their rights to evict you from your house and sell it. Based on market conditions or the state of the property, they might end up selling it for a lower amount than you owe on the mortgage. The mortgage indemnity insurance can then be used to make up the difference in the loan.
However, this doesn’t let you off the hook. Chances are the lender might come for you if there is still an outstanding debt.
How much does a mortgage indemnity premium in Hampshire cost?
This amount varies with lenders from Southampton to Portsmouth and Basingstoke. However, for every £100,000 you borrow, you can typically expect to be charged about £1500.
At Re-Mortgage Fast, one of the services we provide is helping you verify the calculation for this cost. You want to make sure you are not overpaying, otherwise it would cost you significantly in the long run.
How can you avoid paying a mortgage indemnity?
There are many ways to achieve this, and the simplest way is to completely avoid lenders who include this in their terms and conditions.
Re-Mortgage Fast can help by scouting for lenders across Andover, Waterlooville, Aldershot, Farnborough, Fareham/Portchester, Eastleigh and Havant for deals that don’t include a mortgage indemnity premium.
However, sometimes, it can’t be helped, so you will need to do your calculations carefully- this is another service we provide. We can also advise you in choosing a high-lender with the best conditions for your mortgage deal.
Alternatively, we can point you to lenders where you can borrow at a fraction just below the threshold of your preferred mortgage lender.
What can cause you to fall back on your mortgage?
There are many reasons for this, and the most common are:
- Accident or sickness
Other Force Majeure factors can be responsible. It is easy to get an insurance cover for either unemployment or accident and sickness. It will cover you in case you are unable to meet up your mortgage payment for the same reasons.
What happens when a lender makes a claim form mortgage indemnity?
If you are unable to continuing paying your mortgage fees, and you don’t have an insurance cover like a mortgage protection insurance or critical illness policy, your lender will begin the process of re-possessing the property.
After exercising the power of sale (that is after selling the repossessed home), if the amount recouped is still lower than the total amount you owe- even after claiming the mortgage indemnity- the lender earns the right to subrogation.
What is subrogation?
Subrogation means that an insurer can make claims to you for any amount it paid to your lender in form of a mortgage indemnity claim. It is possible for an insurer to recover money paid as a loss that has been caused by a “third party”.
This means if there is still a shortfall in the loan recovery, the lender or insurer has a right to take legal action against you to recover the outstanding debt. Your promise to pay back all the money you borrowed (in the signed mortgage offer) applies, and the lender (or insurer) has about 12 years (5 years in Scotland) to recover all the money you owe.
Making the right decision about mortgage indemnity
Many people are ill-advised about the details of a mortgage indemnity as it applies to their loan. There is an impression that when homeowners default on payment, the indemnity actually protects them from negative equity. We strongly advise against this because it is a misinformation.
We also advise you not to be in a hurry to handover your house keys to the lender. This does not absolve you of further payment if there is a shortfall. Instead, you can act before the lenders do. There are alternative methods to sell the property on your own terms and pay back the difference. However, you may have to compromise in this situation.
While lenders may be sympathetic to borrowers in genuine trouble, it does not mean you should simply forfeit you house and walk away. Anybody who advises you this way is wrong.
Why Re-Mortgage Fast can help
Following years of experience in mortgage services, we provide intelligent mortgage advice for our clients. We will help you from the onset so that they don’t get stranded.
If you suspect you will likely run into problems with your mortgage, consider re-mortgaging for better rates. Alternatively, you can find a quick, lucrative buyer for your property and avoid all the trouble that comes with the lender’s re-possession.
From Winchester, Fleet, or Petersfield, our clients can testify to the value of our service.
If you are in Hampshire and want to learn more about a mortgage indemnity, please fill our contact form to set up a meeting.