Can a mortgage provider insist on taking out their life insurance?

Chutzpah

Hi all,

We're currently in the middle of a mildly complicated house purchase. In a nutshell, we're purchasing my wife's mother's house. We're arranging a mortgage for the amount that she's happy to have, and she's gifting the remaining equity as the deposit (and classing it as my wife's inheritance).

We're using "her" financial adviser, as she knows and likes him. She's paying all his fees so I wasn't bothered with this.

We got the decision in principle last week, no problems. However, the guy insisted on quoting us for life insurance cover from the same bank too. I told him that I didn't think it was necessary - my wife and I already have separate cover (we got it for our family after seeing the effects on my sister after my brother-in-law died, leaving two kids behind), but he said he'd do a quote to see if he could beat what we already had.

The quote is worse than we've got. It'll only cover the mortgage, and despite being a joint policy will only pay out once. Currently if both of us die, the mortgage could be covered and our kids have some money put back. And it actually costs more than our two separate policies combined.

However, he's being very coy about whether we *need* it. He's not giving a straight yes or no answer, but finally after much cajoling said "I recommend you get it as the mortgage company will most likely insist on you have life cover through them, and will reject the application if you don't have it".

I'm not sure if I buy this line. We already have a decision in principle, why would they suddenly turn us down without giving us a chance to take out the insurance? The decision in principle only mentions having buildings insurance as a pre-requisite.

I get the feeling he's just trying to get the extra commission from another product sale, but before I take my concerns to the mother-in-law (who like I said, likes him) I want to check whether this is the sort of thing they can insist on.

Ta!

Thrugelmir

Chutzpah wrote: »

We're arranging a mortgage for the amount that she's happy to have, and she's gifting the remaining equity as the deposit (and classing it as my wife's inheritance).

Class it any way you wish but it still cause you issues. IHT and depraviation of assets spring to mind.

Where's your wife's mother going to live?

Chutzpah

That's why we have an adviser involved :-) All the tax liability etc. is being paid by her, it's all above board.

I've just been reading this: http://www.moneysavingexpert.com/mortgages/cheaper-life-insurance, my remaining question really is whether they could suddenly reject it after the decision in principle (and without stating it's a pre-requisite)

Thrugelmir

Chutzpah wrote: »

That's why we have an adviser involved :-) All the tax liability etc. is being paid by her, it's all above board.

There's no tax liability when it comes to deviation of assets.

Chutzpah

To be honest I'm not keeping abreast of any of that stuff, I just want the mortgage sorted Anything else is her problem, I'm just stressing out about the bits relevant to me

Just wanted to make clear in case anyone thought anything shifty was going on (there doesn't appear to be a paranoid smiley on here).

Either way, this whole process has made me realise that I only ever want to buy one house....

Thrugelmir

Chutzpah wrote: »

To be honest I'm not keeping abreast of any of that stuff, I just want the mortgage sorted Anything else is her problem, I'm just stressing out about the bits relevant to me

It may become your problem in the future. So proper advice needs to be taken. If issues have not been highlighted and pointed out to you then your professional advisor is doing a poor job.

betmunch

Thrugelmir wrote: »

It may become your problem in the future. So proper advice needs to be taken. If issues have not been highlighted and pointed out to you then your professional advisor is doing a poor job.

I think from the dodgy sales tactics on the life insuarance its obvious the advisor isnt doing a great job!

Thats way out of order, and it really wind me up.

Reminds me of why I couldnt hack working for Countrywide or Sequence!

ACG

The short answer is no you do not have to have life insurance with any lender.
The fact you have more cover in place for a lower premium means its pointless replacing it.

If you dont like the advisor or dont feel comfortable with them, dont use them for anything other than the mortgage.

If i feel someone is trying to hide something or do something that isnt in my best interest just for him to earn a few extra bob then i wouldnt use them and would go elsewhere. Whether it be a PC, a TV or a service such as mortgage advice.

Your not there to feed his family thats his job. Your there to get the best for you and your family.