Mortgage Insurance - was I mis-sold my policy?

GeniD

Hi there,

Go easy on me please!

In 2009 we took out a mortgage with Halifax via an independent mortgage adviser. We were informed at that time (in no uncertain terms) that this insurance was mandatory and we couldn't take out the mortgage without it. We did explain that my parents had agreed to act as guarantors if needed so weren't sure we needed it but again we were told it was mandatory, we took out a policy with Scottish Provident also via the independent mortgage adviser.

I only query this now as we are looking at taking out a new mortgage as we're moving house and I thought I'd start gathering quotes for our "compulsory" insurance only to find out that it's not actually compulsory...this alone makes me feel like it was massively mid-sold. Unless at the time it was compulsory?

Thanks for your help!

Nasqueron

If it was an independent broker and your advice was free then yes they can require you to buy insurance through them so they get commission - your choice would be to pay for the advice directly and get your own insurance.

Would your parents really be willing and able to pay the full price of your mortgage in the worst case scenario?

GeniD

Thanks for you fast reply - very much appreciate it.

Ah ok, so it was mandatory that we took out a policy through them rather than it being mandatory in order to get a mortgage. A bit naughty that this wasn't explained to us at the time but I'm guessing perfectly legal/above board?

Yes my parents are willing and able to help if ever needed, I'd rather stand on my own 2 feet though.

Nasqueron

GeniD wrote: »

Thanks for you fast reply - very much appreciate it.

Ah ok, so it was mandatory that we took out a policy through them rather than it being mandatory in order to get a mortgage. A bit naughty that this wasn't explained to us at the time but I'm guessing perfectly legal/above board?

Yes my parents are willing and able to help if ever needed, I'd rather stand on my own 2 feet though.

I can't comment on your point of sale and what you were told but yes, it is a perfectly legitimate business model (so long as there is no issue with the insurance policy), how would the broker pay his bills if he did it free

A guarantor for a loan of any sort is liable for FULL repayment of the entire borrowed amount, should you (and partner if on the mortgage) fail to pay, the guarantor would be expected to pay it off for as long as necessary (even to fully clear it) which is why guarantor loans are such a bad idea

GeniD

It makes perfect sense now you've explained it! We used 'New Homes' as our independent adviser as they were recommended by Barratt Homes. The way it came across at the time was that it was a stipulation in getting a mortgage rather than for using their free service. You live and learn I guess!

As a gift to us my parents wanted to be named on our mortgage as guarantors, we didn't put them on in the end though as I wanted to be independent! (Although my parents call this being stubborn ��) I am incredibly lucky that we have this sort of stability and am very aware of what they have offered to us and what they have committed to.

dunstonh

We did explain that my parents had agreed to act as guarantors if needed so weren't sure we needed it but again we were told it was mandatory

FOS has not been accepted that as a valid reason in most cases. Especially if the mortgage was not formally set up with a guarantor and/or if the parents didnt have sufficient capital to cover it in a way that would not impact on their lifestyle.

e took out a policy with Scottish Provident also via the independent mortgage adviser.

Scot prov is a multi-segment policy provider. It offers life assurance, critical illness and income protection. I dont know if it offers MPPI.

Ah ok, so it was mandatory that we took out a policy through them rather than it being mandatory in order to get a mortgage. A bit naughty that this wasn't explained to us at the time but I'm guessing perfectly legal/above board?

A very common model. Mortgage commission is not what it used to be and in low value areas, the brokers often need the insurance to avoid charging a fee (or higher fee)

We used 'New Homes' as our independent adviser as they were recommended by Barratt Homes.

It should be noted that they are not independent. Never use brokers from estate agents or builders. They have the worst reputation in the industry. Local independent firms are your best bet. They live or die on local reputation and tend to be longer established and have lower staff turnover.

magpiecottage

dunstonh wrote: »

Scot prov is a multi-segment policy provider. It offers life assurance, critical illness and income protection. I dont know if it offers MPPI./QUOTE]Scottish Provident is a long term insurer. PPI (including MPPI) is a short term insurance policy. I do not think it is authorised to provide short term policies.

Where you find insurers that offer both it is generally provided by two different firms under the same banner.