Principality 'index-linked' specification for Buildings Insurance

Wadsterboy

I'm a lurker rather than a poster, but just wanted to share this with anyone applying to Principality for a mortgage.

Got a pretty good deal on a 5-year-fixed but have hit a late snag. Got mortgage offer okay (took three weeks from sending documents though) and ahead of exchange took out Buildings Insurance via Swinton.

Specified that needed £170,000 worth of cover for rebuild (as specified by Principality). Policy documents came through, stating I was covered for up to £500,000 rebuilding costs.

When solicitor got policy, advised that Principality require an index-linked policy. I spoke to Swinton who said that in effect the policy was index-linked as it would pay out upto £500,000.

Rang Principality, they said your solicitor needs to make this enquiry. Solicitor made enquiry and came back saying Principality says the amount insured needs to be £170,000 and it must be index linked.

Result is that my Swinton branch is having to cancel my policy (there will be a penalty) and find me another that is index linked.

As far as I am aware, index-linked is not an option you can search for on Internet comparison sites, so using the Internet to find a policy is not an option with a Principality mortgage, as you need to be sure it's index-linked (or you do with the 5-year fixed deal we took) to ensure you can exchange.

I used Quidco so will also be losing that cashback.

Not what I needed just 4 weeks ahead of our proposed completion date!

kingstreet

This is a standard requirement of a mortgage lender.

Wadsterboy

I admit to a degree of naiveity on my part, but another thread from the Forums (I can't post it) suggests it shouldn't matter, as the limit on the policy I took out is £500,000, way above the £170,000 required.

However, I realise conditions of offer are conditions of offer, and I won't get my money without satisfying what Principality wants!

kingstreet

Yep. Sad fact of life I'm afraid.

Their money. Their rules.

sammyjammy

I just completed last week on a Principality mortgage and didn't get asked anything about my buildings insurance, I renewed my policy back in September so its not even coming up to renewal time.

Hmm strange, I wonder if they will now come back and say the same to me, if they do I'll be in the same position, cancellation fee and trying to find another insurer thats index linked.

kingstreet

Quite often, a condition may be in the mortgage offer, but it's the solicitor who is acting for the lender and the purchaser who is responsible for enforcing it.

sammyjammy

Thanks Kingstreet, thats interesting. I used Principality's own solicitors and didn't have representation myself other than my broker.

kingstreet

AFAIK in common with most lenders, Principality doesn't have a solicitor firm, it simply farms business out to its panel members. These are independent firms who offer bulk discounted fees to get the business. A remortgage is usually a bit less "detailed" than a purchase, so things may not always be quite as vigorously enforced.

It can be individuals within firms who enforce conditions more vigorously than their colleagues. Wadsterboy's solicitor appears more attentive to detail than many others and he has enforced the condition to the letter, when perhaps he could have viewed the "blanket cover" as being in excess of Principality's minimum requirement by some considerable margin. Still it is HIS practising certificate we're risking here!

It would be interesting to see if Principality actually sell bedroom-rated blanket cover without indexation to their mortgage customers, accepting that it meets their own mortgage conditions, when it may not actually do so...

Wadsterboy

Thanks for the interesting contributions. My solicitors are acting for Principality and, as mentioned, they have been quite attentive to the conditions of the offer. They are insisting on seeing evidence that the policy is index linked. They have also specified the amount insured must be £170,000 but Swinton advise that all policies default to a higher amount and that's it's nigh on impossible to get a policy that will give you a specific amount. I'm hoping the solicitors won't come back and query this again, as they are setting me an impossible task!

Just to say, managed to get Swinton to waive their £25 cancellation fee and find me another policy with Allianz - it cost me an additional £150 though for the index link, although it's a fairly good policy not just the cheapest. At this stage, so close to exchange, I couldn't afford to mess around.

Don't even remember my solicitor asking for my insurance policy when I completed my last purchase in July 2007 - pre-crash days of course!

Interestingly, L&C advised not to go with Accord due to the length of time they take to process application, but it seems Principality are very slow at the moment - it took three weeks from sending documents to get a decision and we had to chase hard. I'm redeeming with Accord, but have no complaints about them.

sammyjammy

Mine took two months from the day of the meeting with my broker, I think it was all ready to go after five weeks but I couldn't complete until 1st November due to my ERC with Halifax.

sammyjammy

I have now had a letter from Principality about my buildings insurance. If I don't want to take their insurance out then I have to pay £30 to them and provide a copy of my existing schedule to see it meets their requirements. it doesn't mention index linking or that they need to be named as having an interest in the property.

I thought they had stopped this penalty if you don't take out our insurance?