Why people should consider protecting themselves.

homer_j_3

CLAPTON wrote: »

now it seems to me, if you are buying and you can't pay the mortage, unless you have negative equity you can sell the house, realise a useful sum and rent instead... how is that worse than renting and being thrown out?

Good question, firstly, you will not be chucked out after month 1 - you may get upto month 6 before this happens - or later. Over this period of time, your equity is decreasing due to the simple fact no payments are being made.

You then need to pay the admin fees that are being constantly added. Once again decreasing the value.

The lender will have instructed solicitors by month 3 on average. Guess who pays these? Yep - you, not the lender.

They then start adding admin fees on admin fees and more legal costs as they draw their legal documents together for preperation for court. More cost.

You eventually get evicted - you are still responsible for the mortgage and the debt is increasing by the day.

The lender then gets the baliffs in and locksmiths to secure the property. Guess who pays for these? Yep - you again.

The lender then puts the house on the market. Thats estate agency fees, I don't think you need to ask who pays these.

The house will be sold at best at least 6 weeks and your mortgage interest is racking up. You could be sat on there for 2 or 3 months. All this time your equity is decreasing.

Lets presume you are lucky and you get full market value, the lender then needs to get the solicitor to do all the legal work for that. More cost to you.

So as you can see - the cost of being repo'd is a lot more than your landlord simply telling you to sling your hook.

So lets presume you have some money still left at this point - you approach a landlord for renting, they ask for references? You show them your mortgage statement - whoops. You explain that you fell on bad times and they say that they will credit check you - whoops. You will need a massive deposit if not a whole 6 months of rent.

You can imagine that this is the good scenario. No equity with these 125% mortgages, or little deposits and you are well and truly stuffed!!!!!

PBA

I totally agree with homerj, though of course like him I'm in a line of work where I get paid more if I sell more insurance. The big problem with insurance is that for the vast majority of policyholders it turns out to be a waste of money - you're always insuring against a risk that is unlikely to happen. However if it does happen then the insurance turns out to be invaluable.

I think one problem is with well meaning advice columns (including some of the editorial on this site). I have certainly had people tell me that they don't want PPI or life cover because Martin says it's a rip off. Insurance certainly varies wildly in price, and it pays to shop around, but I don't think any sensible advisor would advise against taking cover just because the policy offered by your bank or mortgage broker is expensive.

homer_j_3

yes it is amazing how many people will just see something on tv or read something and then come to a conclusion based on very little information. Im sure everybody is guilty of this.

If anybody was to really sit back and think about it and weigh up the actual consequences of what their lives would be like if something was to happen that could have been covered. As I said - its down to risk and personal pref but I think that insurance should be compulsory with mortgages and not for my pocket but because of the benefit it gives.

wecanhelpu

homer_j wrote: »

yes it is amazing how many people will just see something on tv or read something and then come to a conclusion based on very little information. .

I will assume that this is not aimed at me so will not respond to it

The point I was trying to make (and was mentioned in the article I posted)was that the premiums are massively out of proportion to the risk and are particularly bad value when offered by the mortgage/credit providers.
Also, they contain lots of exclusions hidden in the small print and are notoriously difficult to claim on.

If people are going to take out PPi they would be better off seeking out a stand-alone product from another provider.

homer_j_3

wasn't aimed at you - no. I must admit, a lot of my opinions are formed on what I read and can often see both sides.

I think that the ABI needs to standardise these insurances and make the policy wording for these polices in clear bullet point text to what can cause them to fail to pay.

You are looking at Accident Sickness and Unemployment, which is something I sell very little of. I prefer to sell family income benefit and mortgage payment protection (Income Protection). These are policies that will normally pay out for a longer period of time and will provide more comprehensive cover. You can get these policies from most insurance companies and you do not need to take with the company providing the debt as such.

just to add - redundancy cover is something separate

mdstevensuk

does anyone know how we could get out of this five year PPI debt. Paying for four years of cover we are not recieving seems so unfair and was badly sold to us and now means we have to sell our house and both cars to clear our debt and start again.:mad:

homer_j_3

was it sold as a single premium and added to the loan?

wecanhelpu

That's fair enough homer.
I've got nothing more to add - I think we've kicked this one around enough and can agree to disagree about the value of different insurances.

People should just be aware of exactly what they are getting for their money and then weigh up the benefits themselves and then shop around for the best policy. I think we can agree on that.

homer_j_3

yes- I thought you brought a good balance to the discussion.

mdstevensuk

hi yes it was aded to the loan, but no where did it say that if you paid off the loan early that we would also have to pay the remainder of the ppi.