Should I get home buyer insurance for my new house/flat?
With all the hoops to jump through when buying a new house or flat, having some form of peace of mind can be a lifesaver. Home buyer insurance can be an effective way of making sure you’re covered in case there are any issues with the process of buying your home. But what is it, and do you need it? Find out in this post.
There can seem like an endless amount of hoops to jump through when buying your new house or flat, as well as further variables from your vendor’s side. Home buyer insurance can be an effective way of making sure you’re covered in case there are any issues with the process of buying your home, as well as additional policies such as mortgage payment insurance - which covers you in case there are problems paying your mortgage.
What is home buyer insurance?
Sometimes falling under the term protection insurance, home buyer insurance is a policy which provides you with cover if the purchase of your home falls through. Expenses can quickly mount when buying a home, and a policy like this can help you to claim these expenses back.
How much does home buyer insurance cost?
Depending on the level of coverage required, a “standard” home buyer insurance policy can cost as little as £65. Not bad in the grand scheme of things.
What does home buyer insurance cover?
Home buyer insurance covers expenses you may have incurred whilst buying a home, such as surveys and legal fees. You might be surprised at how extensive some home buyer insurance policies can be, so let’s take a look at some of the eventualities you could claim for.
Gazumping
Gazumping is when your vendor accepts a higher offer on their property, having already accepted yours. Unfortunately, gazumping is completely legal and there is very little you can do in a situation like this. The main worry for people in this situation is not only the fact that they have to start their property search all over again, but that they would have incurred costs such as valuation surveys, lender fees and conveyancing fees, which can quickly mount to several thousand pounds. And that’s exactly what home buyer insurance can help with.
Property withdrawal
A vendor changing their mind and deciding not to sell is a common occurrence, which can also leave you out of pocket. Home buyer insurance will cover you in the event the vendor of your prospective home withdraws the property from the market.
Change in mortgage lender valuation
In the eventuality that your mortgage lender’s valuation comes in below the offer that was accepted, it can mean that the lender will not lend you enough to complete the purchase. Unless you are able to make up this shortfall or find another lender who offers a higher valuation, you will need to find another home to buy.
Survey reveals extensive repair work is required
If your survey reveals that there is necessary remedial work which needs to be carried out, and if as a result your purchase is no longer feasible, then a home buyer insurance policy will also cover you here.
Mortgage lender requires works to be carried out on the property
If your lender insists that their terms of the mortgage mean that certain works need to be carried out on the property, it could cause the purchase to fall through. Unless you are willing to pay for the works and/or the vendor agrees to lower the purchase price, it is likely you will be at a stalemate. Again, a home buyer insurance policy would give you cover in this case.
Limitations of cover
Although a home buyer insurance policy covers many eventualities, there are limitations - not only to the conditions but also to the amount of cover you will be eligible to receive.
Limitations to costs incurred
The majority of policies will have a cap on how much they will pay out in certain areas. For example, most policies offer protection of conveyancing fees up to a value of £750, and survey/mortgage valuation fees up to £500. If you’re gazumped and the offer accepted is less than £1000 higher than yours, you may not be eligible to receive cover, as this is the typical minimum threshold.
Your survey has been carried out before the start date of your policy
If you have already had a survey prior to your policy starting, you will not be eligible for cover.
You decide not to buy the property
Some policies will offer cover if you can’t buy your home due to unforeseen circumstances, such as being made redundant. But, if you simply change your mind and decide you don’t want to proceed with the sale, you will not be able to claim any expenses.
If fees can be refunded
If, for example, your conveyancing or other fees can be refunded by the relevant parties, you will not be able to claim on your policy.
Not using a solicitor or professional conveyancer
In almost all cases, you must use a licensed professional to carry out your conveyancing on the property. If you do not, the policy will be considered void and you won’t be able to claim any expenses.
Summary
There are so many moving parts when it comes to buying a home. With everything from complicated chains to navigate, through to making sure your mortgage is ready to go, there can be so much to think about. Even when everything is lined up from your side, a change in your vendor’s circumstances can throw everything out of sync.
Home buyer insurance can be one way of adding some certainty in a notoriously uncertain process, especially when you consider that the price of such a policy is very reasonable, and covers many different scenarios. There are limitations to these policies though, and it’s important to make sure you fully understand the extent of your cover. It might be worth opting for a higher level of cover, at a higher cost, to give you more protection.