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    • Former MSE Helen
    • By Former MSE Helen 27th Mar 12, 10:39 AM
    • 2,324Posts
    • 971Thanks
    Former MSE Helen
    MSE News: Is mortgage insurance a better bet than a fix?
    • #1
    • 27th Mar 12, 10:39 AM
    MSE News: Is mortgage insurance a better bet than a fix? 27th Mar 12 at 10:39 AM
    This is the discussion thread for the following MSE News Story:

    "Borrowers who want to cap their costs have an alternative to simply getting a new home loan..."

Page 1
    • JimmyTheWig
    • By JimmyTheWig 27th Mar 12, 11:00 AM
    • 11,848 Posts
    • 11,390 Thanks
    • #2
    • 27th Mar 12, 11:00 AM
    • #2
    • 27th Mar 12, 11:00 AM
    So this would turn a 2 year 4% variable rate into a 2 year 4.45% fix.
    Sounds reasonable value.
  • DVardysShadow
    • #3
    • 28th Mar 12, 5:35 AM
    • #3
    • 28th Mar 12, 5:35 AM
    The normal business model of insurance is that the insurer averages out a lot of random events which occur independently across a number of policy holders. Not all policy holders have their car crash on the same day

    This 'insurance' is expected to pay out when all the policy holders have their car crash all at once. So as I see it, it is not truly insurance. It looks to me like it is money being borrowed at very low rates and put on deposit some where. The premium is the difference in rates between borrowing and depositing. And the payout is based on the higher deposit rates if bank rates go up. So assuming that the higher deposit rates can be achieved, it should pay out.

    To me, this looks like one of those complex financial instruments which brought the banks down, but this tie being sold to consumers. Add some leveraging in there and it may be ripe to go horribly wrong.
    • Pincher
    • By Pincher 28th Mar 12, 6:34 AM
    • 6,516 Posts
    • 2,491 Thanks
    • #4
    • 28th Mar 12, 6:34 AM
    • #4
    • 28th Mar 12, 6:34 AM
    Can anyone confirm the 90% FSCS cover?
    Does anyone know how long a FSCS claim typically takes to payout?

    For Buy-To-Let landlords, is the pay-out tax exempt?

    As we all know, mortgage interest can be offset against rental income. Let us say you have a 100k mortgage (interest only to keep it simple). BOE+2.5%=3% means you are paying 3,000 interest per year. So in 2012/13, 3,000 is tax deductible.

    Let us say you pay the premium with a +0% cap, so they start paying out when BOE goes up, say April 2013. Say the BOE keeps climbing, so they pay out 2,000 for tax year 2013/14. You paid 5,000 mortgage interest, so you can claim 5,000 deductible. If you don't have to declare the 2,000 payout as income, yippeee!

    In that case, I will gladly pay the premium, and pray BOE goes to 15%!
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