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How
to avoid being ripped off by your
friendly mortgage company
What
are tie ins?
Aren't they illegal?
How to avoid being conned
Possible benefits of bundling
The mortgage market is becoming increasingly competitive. Mortgage lenders lure you in with great sounding cut-price interest rates.
To make up for their "loss leader" they'll try various ruses particularly getting you to buy their insurance policies. This is known as "bundling".
But these home or mortage payment protection policies will be overpriced and cost you a lot more than neccessary .
Sometimes
they'll make out as if taking their policy is
compulsory ie it's a condition of your taking their
cut-price rate.
Increasingly they're charging a fee - often £25 - if
you insure elsewhere. (This type of penalty is known as a
"tie
in").
Even when compared to the savings you think you're making on a "cheaper" mortage, tie ins are unlikely to give you the best value.
Shop around and try to ignore compulsory insurance tie in scams, no matter how urgently you want the mortgage.
If you arrange insurance independently differences of up to £150 a year on Buildings and Contents Insurance are commonplace. That's £3,750 over a 25 year mortgage term.
If that money was going into your pension fund instead the difference could be at least £10,000. Do your future self a favour...
Some
say that the cheap looking mortgages are a deliberate
way of luring people in to the insurance tie ins which
is where the mortgage lender makes the real money.
Aren't they illegal?
How to avoid being conned
Possible benefits of bundling
Back to contents of Home Insurance Guide
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Nope not yet. The government have been making noises about it for some time but haven't quite got round to it.
There's
a myth doing the rounds that tie ins are already illegal.
It's not true. (Funnily enough it seems that the people
spreading this myth are the mortgage lenders and their agents.
Of course this would be nothing to do with making people think
they don't have to bother shopping around...).
If you need clarification on this issue call the Financial
Services Authority helpline on 0845 606 1234.
How to avoid being conned
Possible benefits of bundling
Back to contents of Home Insurance Guide
See full contents of the Home Buyers Guide
Read about How to get a Mortgage
I've read enough for now and want to get a free Quick Mortgage Quote
The
trick is to shop around
Don't worry about the fee the lender may say you'll have to
pay if you insure elsewhere. You'll more than save it - and
some insurers may even pay it for you.
The lenders know that most people won't be fussed and will just take their insurance without shopping around.
If you do this it may well cost you more than you saved with the bargain interest rate. Even worse, once you've taken an overpriced insurance policy, you may well find that the price goes up and you can't get out. You'll have to pay through the nose.
Always
get three quotes when buying any financial product.
Read on:
Possible benefits of bundling
Back to contents of Home Insurance Guide
See full contents of the Home Buyers Guide
Read about How to get a Mortgage
I've read enough for now and want to get a free Quick Mortgage Quote
Having told you above about why to avoid insurance tie ins, bear in mind that some cheaper insurance policies may not give you the same level of cover as the more expensive ones.
Some would also say that it's good to keep everything under one roof. If there's a problem you only have one organisation to deal with... But then again, given the nature of large organisations, where departments seem to fight each other rather than co-operate, maybe not...
Some lenders also claim that their polices are "block policies" meaning all their borrowers pay the same regardless of where they live. But all you have to do is get a quote for your postcode and compare it.
To read more on this subject please see the list below or your mortgage guide or your home buying guide
Read enough? Just want a quote? To get your best mortgage quote quickly and easily we can put you in contact with a recommended mortgage adviser. It's free, completely confidential and there's no obligation at all. Simply fill out the form below
Household
Insurance
(aka Buildings and Contents Insurance)
Mortgage
Payment Protection Insurance
Life Insurance
Mortgage
Protection Decreasing Term Assurance
Permanent Health Insurance
Critical
Illness Insurance
Mortgage
Indemnity Insurance
About
Insurance 'tie ins" / bundling
Insurance
Tips
Fixed
Rate
Capped
Rate
Discounted
Rate
Interest
only mortgages
Interest
repayment arrangements
Choosing
a Mortgage
Different Mortgage Types
Re
Mortgages
How to Find your Mortgage
Mortgages in Principle
Guide to Buying Home in the UK
Guide to UK Home and Mortgage Insurance
Click
here to see your Latest Best Buy Mortgages
Back to contents of Home Insurance Guide
See full contents of the Home Buyers Guide
Read about How to get a Mortgage
I've read enough for now and want to get a free Quick Mortgage Quote
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