Single Premium Mortgage Risk Payment

edited 30 November -1 at 1:00AM in Reclaiming Mortgage Fees, Council Tax, etc
19 replies 3.6K views
This question may have been asked and answered and if so apologies however I wonder if someone might give me guidance on the following:-

In 1996 Took out an interest only mortgage with Yorkshire Building Society. Repayment vehicle via 2 endowments. Standard at the time.

At the time, YBS required additional security as the mortgage (at 90% LTV) exceeded their normal limit of 75%. The additional security was a Mortgage Risk Payment at a single premium of £928 which sum was deducted from the total loan amount given (therefore interest payable on the mortgage was also payable on that amount of £928 for the term of the mortgage with the MRP being for the benefit of YBS not the the borrowers.

I understand that this was common practice but should we have offered the opportunity to insure the risk with another company? The mortgage offer was conditional upon us taking it out, benefits etc. where not explained and it is listed in the mortage statement for the first year as "Ins. Guarantee Prem". Was it right that we should have paid interest on premium throughout the term of the mortage? We were not offered the opportunity to pay for the premium separately and would have been able to do so.

Any thoughts?
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  • dunstonhdunstonh Forumite
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    The additional security was a Mortgage Risk Payment at a single premium of £928 which sum was deducted from the total loan amount given (therefore interest payable on the mortgage was also payable on that amount of £928 for the term of the mortgage with the MRP being for the benefit of YBS not the the borrowers.

    All quite normal there. So, no issues.
    I understand that this was common practice but should we have offered the opportunity to insure the risk with another company?

    No that is not correct. For two reasons.
    1 - The policy was for the benefit of the lender. Not for you. They just got you to pay for it. So, you had no choice.
    2 - For personal insurances (which this isnt) the requirement to allow people to buy elsewhere came in a number of years later and was obviously not applied retrospectively.
    Was it right that we should have paid interest on premium throughout the term of the mortage?

    You pay interest on it for as long as you borrowed the money. The MIG payment was in a sub account which could be repaid at any time. So, it was your choice.
    We were not offered the opportunity to pay for the premium separately and would have been able to do so.

    Lenders did give the choice. So, if you missed it, then there is nothing you can do about it now. You have 6 years from the event in question or 3 years from being reasonably aware of an issue to raise a complaint (whichever is longer). You are talking about 21 years year and an allegation which cannot be proven.
  • Why isn't Mortgage indemnity Premium insurance illegal.
    People were made to pay for a policy that didn't cover themselves but covered the banks, then to have the insurance companies claim back their money from the person who paid the policy. I still can't believe that they got away with it.
  • I paid this premium. Then my relationship ended because of violence. I had to leave the property. 2 visits to crown court to try and distance myself from this mortgage, but couldn't. He defaults. THe Mortgage insurance pays the bank for part of their loss, I pay the bank for the rest. 27 Years since I left the property I am still paying the insurance company what they paid the bank. I thought the reason for insurance was to cover you in misfortune. How can it be legal for them to claim money back when they have taken a premium to cover you?
  • dunstonhdunstonh Forumite
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    Why isn't Mortgage indemnity Premium insurance illegal.

    Because there is no reason for it to be.
    People were made to pay for a policy that didn't cover themselves but covered the banks, then to have the insurance companies claim back their money from the person who paid the policy. I still can't believe that they got away with it.

    You had a choice. Either save more or go to a different lender.
    I thought the reason for insurance was to cover you in misfortune.

    And had you bought personal insurance you may have been covered for that.
  • edited 5 October 2017 at 12:16PM
    phillwphillw Forumite
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    edited 5 October 2017 at 12:16PM
    dunstonh wrote: »
    Because there is no reason for it to be.

    All the people that I know who paid it, were mis-sold.

    Either because they were told that it was for their benefit, or because it was a hidden extra fee that wasn't in the headline advertised rate.

    But sure, if someone is able to honestly and openly sell that insurance then it's up to the buyers. It's never happened yet & I doubt it ever will.
  • zx81zx81 Forumite
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    I don't believe MIG was EVER mis sold.
  • edited 5 October 2017 at 12:25PM
    phillwphillw Forumite
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    edited 5 October 2017 at 12:25PM
    zx81 wrote: »
    I don't believe MIG was EVER mis sold.

    What you believe contradicts what I know.

    Maybe you're being pedantic over what constitutes mis-selling? It's not cut and dried as Plevin highlights.

    Requiring the insurance to be provided by themselves or a named company would indicate that it was mis-sold.
  • zx81zx81 Forumite
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    phillw wrote: »

    But sure, if someone is able to honestly and openly sell that insurance then it's up to the buyers. It's never happened yet & I doubt it ever will.

    It was certainly openly and honestly sold to me, alongside a 100% mortgage. Perhaps you're thinking of something else?
  • edited 5 October 2017 at 12:31PM
    phillwphillw Forumite
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    edited 5 October 2017 at 12:31PM
    zx81 wrote: »
    It was certainly openly and honestly sold to me, alongside a 100% mortgage. Perhaps you're thinking of something else?

    It sounds like you were mis-sold but are now in denial. Most people are unaware when they are mis-sold.

    Did their insurance quote beat all of the other quotes you got? Can they demonstrate whether the insurance premium was related to the risk?
  • zx81zx81 Forumite
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    It was a very small amount overall and not one that worried me. Given I wasn't in a position to save more, I was pleased with the overall package.

    Certainly no denial here. I prefer to make my own decisions and then stand by them. Though I accept that's somewhat unfashionable.
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