When to insure? At exchange or completion

mokpot

Hi All,

Many thanks for the help received on the forum so far.
My question is about when to insure the new-build property in context of our contract and mortgage.
We're looking to exchange this or next week and complete towards end of year.

Here's an extract from the contract with the builder (Avant) - really don't understand the jargon here:
The Seller shall insure the Property against loss or damage by fire and other perils customarily covered under any "All Risks" Policy until Legal Completion provided that the Seller shall not be required to supply particulars of such insurance cover and neither the Buyer nor his mortgagees (if any) shall be entitled to have a notice of his or their respective interests endorsed on the Seller's policy or to raise any objection or enquiry with regard thereto.

An one from the mortgage docs (HSBC):
You must take out and maintain building insurance for a minimum of the full reinstatement value of the property. This must be in place from first drawdown (of from when risk is assumed, of this is earlier) and must be maintained for the duration of the Loan.

Many thanks

user1977

If you're buying new build then you insure from completion. 

PlumLuck

Just a note on Avant - I would really check who the management company is and if you're comfortable with them before you go through with anything.

canaldumidi

1) The seller will insure from Exchange.

2) However, a condition of your mortgage is that you insure from Exchange. I suspect that is a standard condition which is normal for non-New Builds. Ask your solicitor (who also acts for your mortgage lender) if that clause in the mortgage offer applies given 1) above.

user1977

canaldumidi said:

The seller will insure from Exchange.

The builders will have insured from as soon as they went on site, exchange isn't relevant to their risk. Lenders (unless they're mad) will not require newbuild properties to be insured from exchange (after all, in many cases the property will just be a muddy field at that point).

mokpot

canaldumidi said:

2) However, a condition of your mortgage is that you insure from Exchange. I suspect that is a standard condition which is normal for non-New Builds. Ask your solicitor (who also acts for your mortgage lender) if that clause in the mortgage offer applies given 1) above.

That's the bit I didn;t really understand in the mortgage terms:
"from first drawdown (or from when risk is assumed, if this is earlier)"

Thrugelmir

mokpot said:

canaldumidi said:

2) However, a condition of your mortgage is that you insure from Exchange. I suspect that is a standard condition which is normal for non-New Builds. Ask your solicitor (who also acts for your mortgage lender) if that clause in the mortgage offer applies given 1) above.

That's the bit I didn;t really understand in the mortgage terms:
"from first drawdown (or from when risk is assumed, if this is earlier)"

If the mortgage funds are requested to be drawndown by the solicitor then the developer will have issued a notice of completion. The property is ready to be occupied. The risk becomes yours. 

mokpot

Thank you. Sounds like mortgage provider also only requires it from the completion date.

mokpot

I thought I'll ask again to be sure - with seller insuring until completion, if property gets damaged between exchange and completion, would they have to return us the deposit? 

user1977

mokpot said:

I thought I'll ask again to be sure - with seller insuring until completion, if property gets damaged between exchange and completion, would they have to return us the deposit? 

If the builders fail to hand over a completed property (for whatever reason) before the longstop date in your contract, yes you're entitled to pull out and get your deposit back. Whether they've actually got insurance during the construction period is their problem.

But really, you're overthinking this. You insure from completion and stop worrying about it.

mokpot

Many thanks.
Probably overthinking, but stakes are high, so I don't mind asking twice!