Home Insurance arrears added to mortgage payments

crazydiz

(This is Interest Only Mortgage).

My Home & Buildings Insurance was taken out with my mortgage provider, therefore, only the one payment debited from my bank - for the last 14 years. All previous correspondence advising of any increase (interest) or changes has always showed my new monthly payment as one figure (interest and home insurance combined).

In December 2011, I received a letter saying my mortgage payments were in arrears by £137.

I wrote a cheque immediately, went to the Branch and checked all account was up-to-date and adjusted Direct Debit (from other Bank) to cover payments in future.

Curious as to why I have these arrears, I looked at the last Insurance Statement (april 2011), and realised my Home & Buildings Insurance had increased from £25 to £40 p/month.

Shortly after that (Dec 2011), I cancelled the Insurance (with mortgage provider) and found cheaper elsewhere. £25 admin fees paid.

Have rang the Branch each month since, to check all is on track with the new mortgage payments (interest only - no insurance) and the amended direct debit from my bank is sufficient. All is well, I'm back on track, I am being told.

In April 2012, I receive the Annual Mortgage Account Statement.

Under "Payments" column, in December 2011, theres an overpayment of £354 with no explanation where this has come from?? It certainly wasnt from me!

Under "Charges" column it reads, Interest = £####, Insurance = £327 (which I assume is for the months up until I cancelled it - 9 months) and "December refund =£354".

I called into the Branch, I again asked if the new Direct Debit and payments were still on track, and again, was told all is well.

I asked staff to explain the Statement, and after calling two other members of staff, they couldn't understand it. I was telephoned later that day with the explanation:-

The Branch pays the Insurer (on my behalf) annually, so when the policy was cancelled (December), the Insurer refunded the money into my Mortgage Account (in the "Payments" section). As the Branch wants this money back, they have added this amount onto my "Charges" (next year’s monthly payment). Also, she told me there were arrears on my Home Insurance. She also went on to say that previously in the year, when the payments were not quite enough to cover the mortgage, the Branch would split the money between the interest, and the Insurance.??

Questions:-

1. When I received the letter explaining my mortgage was in arrears (£137) which I then paid straight away... how can my Insurance payments fall behind? It's a combined single payment?

2. If this £137 proves to be arrears of interest only (though I'm not convinced), should I have had another letter showing arrears of Insurance?

3.Should I have been given an alternative way to pay the Insurance arrears, or at least told what was happening?

4. Am I entitled to a breakdown of my Insurance payments, showing when the payments initially fell behind?

5. How long would they have let these payments fall behind, until someone was prepared to tell me? Did they intend to just keep adding underpayments back onto my "Charges" each year?

6. Am I being charged interest on this charge of £354?

7. As it stands, with the additional £354 added to next year’s mortgage payments, my original direct debit (from my bank to the mortgage Branch) will not be enough to meet the payments, but yet, they still keep telling me everything’s fine.
- The Mortgage Provider/Insurance companies charge £25 to send a letter out, to tell customers they are in arrears. Maybe that's what they're aiming for.

dunstonh

1. When I received the letter explaining my mortgage was in arrears (£137) which I then paid straight away... how can my Insurance payments fall behind? It's a combined single payment?

They are able to identify that it was the underpayment following the insurance increase that led to the arrears.

2. If this £137 proves to be arrears of interest only (though I'm not convinced), should I have had another letter showing arrears of Insurance?

No. Because the insurance is paid in advance, added to the mortgage and then cleared over the next 12 months.

3.Should I have been given an alternative way to pay the Insurance arrears, or at least told what was happening?

What alternative way of paying is there? The renewal notice would have told you the amount. If they used direct debit then they would alter the amount. if you choose to use standing order then you need to change the amount. if it is direct debit then the lender needs to take responsibility for not adjusting the amount as you cannot do that.

As you are not financially worse off, there is little to be gained from a complaint but you may wish to query why they did not increase the direct debit (again assuming it is a direct debit)

4. Am I entitled to a breakdown of my Insurance payments, showing when the payments initially fell behind?

That is pretty easy to see as it will be renewal point to the date of cancellation.

5. How long would they have let these payments fall behind, until someone was prepared to tell me? Did they intend to just keep adding underpayments back onto my "Charges" each year?

you need to ask them. Chances are there is a period to allow for money to balance or a threshold of £100.

6. Am I being charged interest on this charge of £354?

On very old mortgages, it was often the case. On "less" old mortgages typically no as it was handled via a sub account that had a zero interest rate. Of course, it is rare for mortgages nowadays to take insurance this way and has been for some years. So, you will need to ask them.

crazydiz

Thanks for that. Just to explain, the Direct Debit was with a different bank, so yes, I should have increased this to cover the Insurance increase.

With any arrears, I would prefer to pay in full, than spread costs over period of time and have to increase any monthly payments.

Lady at branch did mention a "sub-zero" account and my account being split-up into different subs... but to be honest... I didnt understand. Thankyou for explaining.

InsideInsurance

It is not a direct debit then but a standing order.

If you're having problems it may be better to have a DD as then the mortgage company is the one that can adjust it