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    • Another Custard Cream
    • By Another Custard Cream 13th Sep 17, 8:19 PM
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    Another Custard Cream
    Single Premium Mortgage Risk Payment
    • #1
    • 13th Sep 17, 8:19 PM
    Single Premium Mortgage Risk Payment 13th Sep 17 at 8:19 PM
    This question may have been asked and answered and if so apologies however I wonder if someone might give me guidance on the following:-

    In 1996 Took out an interest only mortgage with Yorkshire Building Society. Repayment vehicle via 2 endowments. Standard at the time.

    At the time, YBS required additional security as the mortgage (at 90% LTV) exceeded their normal limit of 75%. The additional security was a Mortgage Risk Payment at a single premium of £928 which sum was deducted from the total loan amount given (therefore interest payable on the mortgage was also payable on that amount of £928 for the term of the mortgage with the MRP being for the benefit of YBS not the the borrowers.

    I understand that this was common practice but should we have offered the opportunity to insure the risk with another company? The mortgage offer was conditional upon us taking it out, benefits etc. where not explained and it is listed in the mortage statement for the first year as "Ins. Guarantee Prem". Was it right that we should have paid interest on premium throughout the term of the mortage? We were not offered the opportunity to pay for the premium separately and would have been able to do so.

    Any thoughts?
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    • dunstonh
    • By dunstonh 13th Sep 17, 10:29 PM
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    dunstonh
    • #2
    • 13th Sep 17, 10:29 PM
    • #2
    • 13th Sep 17, 10:29 PM
    The additional security was a Mortgage Risk Payment at a single premium of £928 which sum was deducted from the total loan amount given (therefore interest payable on the mortgage was also payable on that amount of £928 for the term of the mortgage with the MRP being for the benefit of YBS not the the borrowers.
    All quite normal there. So, no issues.

    I understand that this was common practice but should we have offered the opportunity to insure the risk with another company?
    No that is not correct. For two reasons.
    1 - The policy was for the benefit of the lender. Not for you. They just got you to pay for it. So, you had no choice.
    2 - For personal insurances (which this isnt) the requirement to allow people to buy elsewhere came in a number of years later and was obviously not applied retrospectively.
    Was it right that we should have paid interest on premium throughout the term of the mortage?
    You pay interest on it for as long as you borrowed the money. The MIG payment was in a sub account which could be repaid at any time. So, it was your choice.

    We were not offered the opportunity to pay for the premium separately and would have been able to do so.
    Lenders did give the choice. So, if you missed it, then there is nothing you can do about it now. You have 6 years from the event in question or 3 years from being reasonably aware of an issue to raise a complaint (whichever is longer). You are talking about 21 years year and an allegation which cannot be proven.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
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