Mortgage insurance Fee

plasmahal · 26 July 2007 at 11:17AM

Hi,

I have just got the paperwork through for my first mortgage offer. I have a couple of queries my broker needs to address.

One in particular I wanted to know about.

The Lender has charged me £25 NOT to take out house insurance through them as i will arrange the best deal on building and contents myself.

Is this legal and normal practice ?

Thanks.

luckyfool · 26 July 2007 at 11:52AM

Yes. It varies from £20 to about £50, and believe it or not one or two lenders actually charge it as an annual fee rather than a one off.

They need to ensure their interest is noted on the policy so that they are notified if you let it lapse. This is so that they can put replacement cover in place to ensure that the building is continuously insured, which they have an obvious interest in. They charge an administration fee for doing this. Whether £25 is a true reflection of their costs is another matter, but it is certainly pretty standard practice just now.