Bridging loans

Buying a house has been classed as one of the most stressful events you can go through and is likely to be the biggest purchase you make in your life. It’s easy to see how a difficult move can get even harder. Some buyers have described how they felt trapped as they had found a perfect job, had their offer accepted on an ideal property and then they were unable to sell their old house. At times like this it’s worth talking to your mortgage broker to see if a bridging loan could be an option for you.

When discussing your bridging loan options with your mortgage broker you will probably learn about the two types of loans available.  An ‘open’ bridge would be used by a buyer who wants to move and has decided on the property they are going to buy but  hasn’t been able to sell their own property. With an ‘open’ bridge the bank will usually demand a that you have a high rate of equity in your property.  A ‘closed’ bridge usually brings with it less risk and is used after you’ve exchanged contracts. It is extremely rare for a sale to fall through after your solicitors have exchanged and as a result you may be surprised at how many lenders that are able to offer you a bridging loan in these circumstances. 

This kind of finance can be expensive but if you’ve already paid out money on surveys and are forced into having a long commute or simply have a strong desire to move, then the long term gains will mean that a bridging loan could be the best option for you.

Renting your property

For people who are not happy with the idea of a bridging loans it might be worth discussing your concerns with a qualified buy to let mortgage broker. Often it can be possible to convert your mortgage so you can rent your property out. Provided that the lender is happy for you to do this and you have all the adequate insurance you could use the rental income to service the loans you have. It is easy to find out if your area is right for setting up a rental property. Have a word with some local estate agents and do some research on the average rental price for properties similar to your own. In most cases, you will make some profit on the monthy rent after all your running costs are met. Many landlords begin their property portfolios in this way and find it a great way to suppliment their income.

Please contact us for more information about bridging loans.

Changes to Mortgage Protection Insurance sales

Mortgage Protection Insurance has historically been dominated by the credit providers and Banks due to their unique market position; right at the point of sale. For many years this position went unchallenged. Lenders soon cottoned on to the fact that customers really needed the peace of mind that Mortgage Protection Insurance could provide, which made it an easy sale. Sales practices became sloppy and the quality of policies became questionable, all in the pursuit of profits.

Well, unfortunately their gravy train has now been derailed by the Competition Commission, which has ruled that the sale of Mortgage protection policies at the point of sale is anti competitive, as the consumer is effectively taken out of the market, without having the opportunity to shop around for mortgage protection insurance.

Now for the Banks, who earn vast sums of money from the sale of these policies, this news could not have come at a worse time, however for the customer, who may well need a Mortgage Protection Insurance lifeline, more now than at any other time in recent history; the commission’s ruling has to be great news.

Increased competition leads to lower prices, technical innovation and greater market awareness, all good news.

If you have been thinking about purchasing a product that will make your mortgage payments, when you can’t, perhaps through redundancy, now is the time to look for a mortgage protection insurance policy that fits your needs.

Don’t forget that even if you have an existing policy which was bought from a lender you are able to switch cover to a new provider. As always, remember to read the policy terms to ensure you remain fully covered.

Mortgage brokers to be affected by PPI sales restrictions

The Competition Commission recently announced that it was planning to introduce a ban on the sale of Payment Protection Insurance (PPI) at the point of sale for loans and credit cards. There would be a 14 day period before the finance provider could offer the customer a PPI policy to protect their new finance agreement.

The banks and finance companies make huge profits out of selling these policies which generally offer poor value for money. The main reason for this is that the purchaser has no time to look around at alternative PPI policies, they are asked to commit to a policy that they have not shopped around for. So the restriction on PPI sales means that customers who do want payment protection insurance (PPI) can do so in their own time and search out a good value policy that suits their needs and not those of the finance company.

Unfortunately, we have recently learned that this restriction will also apply to mortgage brokers and financial advisers who wish to offer Mortgage Payment Protection Insurance (MPPI) to their clients. This seems a little restrictive where the adviser or broker is actually providing advice on what is best for the client rather that just selling a policy. Mortgage brokers will always want to build long term relationships with clients so the last thing they want to do is be over zealous and offer a product which is not right for the client.

Only time will tell whether the Competition Commission proposals for the sale of PPI definitely include mortgage brokers but this look to be the case so far.

Shop around for unemployment insurance

When looking for unemployment insurance it is important to shop around and look at alternative policies. Get quotes from the different suppliers of unemployment insurance, this may include loan insurance, income insurance or mortgage insurance depending on the type of cover you need.

By shopping around for unemployment insurance you will not only get a feel for the difference it cost but it is also important to view the policy terms and conditions. After all, you buy unemployment insurance in case you need to claim so you need to be certain the policy provides adequate insurance protection. Everyone is different so check out the aspects that you think are important to you.

With regards to eligibility, you will need to be working and aged between 18 and 65.

Unemployment insurance is also known as redundancy insurance so be aware of what cover the policy provides. These two are the same cover just known by slightly different names. Unemployment insurance is not always available as a stand alone cover. Many insurers will require you to have accident and sickness cover as well as unemployment insurance. However, there are a few policies that still offer just an Unemployment insurance option. If the sickness cover is not important to you this will help to keep the monthly cost down.

All policies have terms and conditions and small print so it is vital you make sure the policy is right for you. All Unemployment insurance policies will have a maximum time that they will pay out benefits to you, typically this is 12 months but you may be able to get cover for 18 months. All policies will generally have an initial exclusion or waiting period and this should be compared with other policies. The better Unemployment insurance policies will offer back to day on cover where your claim and your payments are backdated to the first day you were off work.

Unemployment insurance can be included in three main types of income protection policy: mortgage insurance, loan insurance and income insurance. Check out which one is right for you.

Landlord Insurance - Don’t Be Caught Out

The private rented sector is booming in the present economic climate, as people are finding it difficult to buy houses to live in.  So if you have a property to let out, you probably won’t have a problem finding tenants.

However, one thing you may not have realised is that you can’t use ordinary home insurance cover for any property you are letting out for profit.  You would find you weren’t covered if anything happened.  What you need is landlord insurance.

The term landlord insurance actually includes several different types of cover. The primary cover is “core cover”, but there are others in addition.

•Core cover.  This is the basic cover you must have.  It insures you against damage to the property while it is let.  For instance, if there is a serious incident such as fire or flood, not only will you have to organise major repairs, but your tenants will have to move out, at least for the time being.  Core cover in addition to the cover for the repairs will include up to 30% of the property value to indemnify you for the loss of rental.

•Public liability and property owners’ liability.  These are separate elements of your landlord insurance, but you need both.  Property owner’s liability protects you against claims made by tenants – for instance if a tenant fell down the stairs and sued you because a stair rod was loose, you would claim on property owner’s liability.  However there are always various visitors coming into the house – either to visit the tenants or to do jobs as tradespeople – and injury to any member of the public would be covered under public liability.

•Landlord’s contents insurance.  You are not responsible for insuring tenants’ property.  Landlord contents insurance covers you against damage to, and theft of, furniture and soft furnishings, or goods you provide for the tenants’ use such as a washing machine or refrigerator.  (You should clearly advise your tenants that they are responsible for insuring their own belongings.)

•Legal expenses.  Unfortunately it often happens that tenants stop paying the rent, behave in a highly anti-social manner or prove a nuisance to other tenants, and need to be evicted.  If they refuse to leave you have to take them to court.  This could be very costly if you’re not insured.  Even if costs are awarded against the tenant, they may refuse to pay.

Many insurers provide a landlord’s comprehensive insurance policy, which covers all these elements.  You can also take out a single policy to cover more than one property if you have them.  Premium costs are calculated individually, on the basis of the property location, type of area, number of tenants, and number of previous claims if any.

If you are just starting up in letting property, landlord insurance may seem like just another expense which you can do without.  However it just takes one incident to make you realise how essential it is!  So don’t be caught out.  Talk to a specialist landlord insurance broker for advice on the best value policies, and make sure you are protected. 

Egg Banking fined by FSA for payment protection insurance sales

Credit card company Egg Banking has been fined £721,000 by the Financial Services Authority for the way it has sold payment protection insurance. The FSA found serious failings in Egg’s telephone sales techniques for payment protection insurance where the benefits of the policy were often overstated.

The FSA has reported that it found failings in 40% of telephone sales of credit card payment protection insurance (PPI) made by Egg between January 2005 and December 2007. Egg halted telephone sales of credit card payment protection insurance in December 2007 and has agreed to contact customers to provide a refund where appropriate.

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