What will paymentshield do if our interest rate changes?

kevinthecaravan

I was made redundant and thankfully I had cover with paymentshield, who have been great. Our fixed rate ends in a few months and as there is no sign of work on the horizon, I am a little concerned. I think I would like to take another fixed rate with our current mortgage provider, who are happy to offer this. Will paymentshield let us do this or will they insist that our mortgage reverts to the standard variable rate?

Peelerfart

Kev,

Without wishing to sound flippant at all because I too have a policy with paymentshield, but, have you asked them ?.

Very pleased to read they have been good for you too

PF

herbiesjp

You can choose whatever interest rate you want.

However you need to advise Paymentshield of any changes to the mortgage payment, to make sure you are 100% covered(and not paying too much/too little for cover that is too high/too little). You do not want to find you are paying for a monthly benefit higher than your mortgage payment and then not got paid out on that amount.

luckyfool

Once you are in a claim period I would imagine they will not increase your cover/payout, though if your rate decreased I suspect they would reduce your payout accordingly. If you decide to fix then go ahead they won't have an issue with it, but do not expect them to increase the payout now.

Once you are back working then you just need to let them know the new monthly payment and they can increase the payment on your insurance so that you have the right level of cover.

kevinthecaravan

Thanks. The reason I have not yet spoken to Paymentshield is that I do not want to make sure that I know the process first. My current fixed rate ends and I think I can obtain a similar product at the same rate so my payment should stay the same. If my mortgage reverts to the SVR my payments will half. I think interest rates will soon rise and therefore I would like the peace of mind of a fixed rate. Will paymentshield just pay the lower amount?

Peelerfart

I had a conversation with paymentshield which may be helpful to some.

The amount I pay on my mortgage is higher then the amount I have to pay, and so was concerned that I was paying for an amount which they would never pay out in the event of a claim.

Paymentshield told me that as long as I was overpaying for six months proir to the claim then they would pay out the amount that I am paying and not what the amount should be.

I have asked them to confirm this by email.

johnbhoy10

Peelerfart wrote: »

I had a conversation with paymentshield which may be helpful to some.

The amount I pay on my mortgage is higher then the amount I have to pay and so was concerned that I was paying for an amount which they would never pay out in the event of a claim.

Paymentshield told me that as long as I was overpaying for six months prior to the claim then they would pay out the amount that I am paying and not what the amount should be.

I have asked them to confirm this by email.

Bringing up an old thread here but this situation is very similar to my own and going through paperwork that needs cleared.:(

I am on a variable rate offset tracker with FD and when i changed product i advised PMS straight away and also advised them that i have it set up to pay interest only every month and then make ad-hoc capital payments on top of that.

Initially the impression i got from the people i spoke to at PMS was that they did not really understand the mortgage product i was on (i struggled myself at first). If their misunderstanding had carried on i would have changed my payments to capital/interest on a repayment basis just to cover myself.

However, the last correspondence i received from PMS states-

'In regards to your query relating to off-set mortgage cover;

The figure we can for cover under our MPPI policy,would be the monthly amount you have been notified that you will NEED to pay in order to repay the mortgage in the required timescale.

If you decide to pay over and above the confirmed payment, then at the point of claim our Claims Team will take the average of the monthly payments over the previous 6 months, to calculate the benefit due to the sum insured.'

Any MPPI experts out there that think i am covered with this letter should i need to claim? (obviously i hope i never have to claim).

It's just that with premiums for this product going from £12 to £36
you would like to think that you getting the cover you are paying for.

regards

johnbhoy10

I have spoken to my lender (FirstDirect) about this and even though this is only an individuals opinion and counts for nothing he reckoned that letter covers me.

However,like me, he thought it strange that that because of the nature of an offset tracker mortgage paying with interest i would receive payments for a year based on my average payments of last 6 months and at the end of the year draw back the full amount and more if i wanted to.

My example-

mortgage of £77000 taken last march with FD and now have £71500 outstanding.

if worst happens paymentshield will pay me the full amount (£700 per month) when all i am REQUIRED to pay is the interest on the mortgage. Above figure is for mortgage & related prems & 33%.
My intrest only payments are approx £160 pm at the mo.

At the and of the year if i wanted to because of the offset product i could in theory draw down the full amount back to £77000. Obviously not something i would want to do.

Surely this is quite a strong position to be in or am i missing somrthing?

Annisele

johnbhoy10 wrote: »

'In regards to your query relating to off-set mortgage cover;

The figure we can for cover under our MPPI policy,would be the monthly amount you have been notified that you will NEED to pay in order to repay the mortgage in the required timescale.

If you decide to pay over and above the confirmed payment, then at the point of claim our Claims Team will take the average of the monthly payments over the previous 6 months, to calculate the benefit due to the sum insured.'

At first I read it the same way you did - however, it does seem extremely unlikely.

I can only come up with one alternative explanation, but since I can't think of a good way to explain it so I'll use some figures (I've made them up; they're intended to illustrate rather than be accurate):

Your mortgage amount is £71,500, and FD have told you that your minimum payment is the interest - £160 per month or so.

If you want to repay the capital over (for example) 25 years, you're going to have to pay more than £160 per month. Let's say that, to guarantee your mortgage would be repaid over 25 years, you'd pay £330 per month at the current rate of interest.

I think that what Paymentshield are saying is that the maximum they'd cover you for is the £330 per month (being "the monthly amount you have been notified that you will NEED to pay in order to repay the mortgage in the required timescale").

If you've been paying some figure between £330 and £160 each month, then Paymentshield will only cover you for the average of the amounts you've actually been paying.

However, I'm only guessing! I think that the wording of the letter you've got from PMS is spectacularly bad, and I'd go back to them to clarify.

Edit: Thinking about it some more, I can see that PMS do refer to *over*payments - it just sounds extremely unlikely that if your overpayments had been £10k per month they'd let you carry on! I also wonder if they mean they'd pay the *lower* of the £330 (say) that you would have needed each month before the overpayments, and the newly calculated amount needed to repay your loan based on the overpayments.

2sides2everystory

Very interesting discussion especially in regard to the offset mortgage in which interest only is required by the lender but where paymentshield seem to be sayng they will pay a minimum of the Capital & Interest Payment needed to pay off the loan in the mortgage period.

I would love to see confirmation of that, in which case PaymentShield would prove to be a very useful product indeed to those of us in the same offset interest only position.

johnbhoy10

Annisele-firstly thanks for your response. I'll try and explain why i hope your wrong.

I'm covered with PMS for mortage payment of £460 per month. This was my premium for my old fixed rate mortgage before i changed to an offset tracker last March. I phoned PMS at the time and i asked if i could keep the figure the same and they said no problem. They were contacted at all stages by me throughout this process and advised of all changes including the way premiums are paid.

My outstanding mortgage is £71500 over 22 years
interest rate of 2.49%
interest only premium is £148 per month
repayment basis premium would be £352 ( I DO NOT SEE THIS AS AN OVERPAYMENT as how would this pay my mortgage faster in the required timescale?? It wouldn't!!

I have actually kept my capital payments so that the average payments of the last 6 months works out at approx £460 per month.

You mention £10k to highlight your point but i think thats irrelevant as i'm not covered for this amount. I am covered for a payment of £460 per month and that is what i believe i should be due if i ever needed to claim.

The really annoying thing is that i am still questioning this over a year after changing over mortgage and i have spoken to them on this matter on numerous occasions (and i mean a lot) and they eventually relented (the way i see it) with the letter. They just do not inspire any confidence in me.

The reason i set up interest only on my mortgage was that some sharp tack on here advised that it was possible to do this on an offset to give maximum flexiblilty. I thought this as good info at the time and still do. It would have being a lot easier to keep payments on a repayment basis and i suppose i could still change back to them but why should i??

PS- the premiums for this product have shot up up from appprox £130 a year to £410 per year over the last couple of years so you would like to think you will get the cover you are paying for should you (hopefully never) need it.

2sides-nice to see someone i same position. There must be more of us as if i recall correctly i think quite a few people on here were going for FD product this time last year.