I am looking to buy an old cottage in a rural area of south east England. My friend informs me I may have problems getting buildings insurance because of the age of the property. What will the insurers consider when assessing the property for buildings insurance purposes?
Generally, the aspects of risk that are examined by insurers when underwriting buildings insurance are the location of the property, nearby trees and drains, soil type, age of property, evidence of mining, cavity wall ties and slopes.
Tree roots spreading into the foundations is a typical problem and clay soils can also affect foundations.
Things like tree roots and debris blocking drains can cause leakage which erodes soil around the drain and creates underground cavities. Any soil subsidence into these cavities is likely to cause building movement at some stage.
For properties built before 1920, age is only a major issue if there has been movement in the last 10 years. There has been concern about the quality of foundations for some pre-1920s buildings, but it is believed the majority of properties should have stabilised by now.
It is difficult to say whether your property would be insurable until it has been fully inspected by a professional surveyor. It is likely that a property of this type would need specialist reports, although as no risk is the same, it is difficult to quantify when a specialist's report may be required. Also, a report can be requested by the underwriters even though not recommended by the valuer.
DEAL ME IN
I have visited a number of mortgage lenders to compare interest rates and cashback deals. I am concerned that whilst trying to get the best deal possible I may be "missing" some hidden costs or benefits.
You're naturally keen to get the lowest interest rate but you may not have been given all the information you need.
When you talk to a mortgage adviser you need to know that they are giving you a clear picture of what is right for you, not for them. You need to consider your future, which may involve a change of jobs, children and a house move later on. A good adviser will be able to outline all its different types of mortgages and the costs of each to you, allowing you to decide which option is the best for you.
You should find out what the lender's policy is on buildings and contents insurance and also on accident, sickness and unemployment cover. Customers often find they must take the insurance policies arranged by the lender to qualify for the "cheap" deals. Lenders can use the commission from selling these policies to subsidise their special offers, but it means you can't shop around for a better policy.
Also, consider whether you will have to pay a charge if you repay your mortgage early. Charges vary from lender to lender, and some are higher than others, so it pays to look closely at the different calculations to be used if you might want to repay all, or part, of your mortgage early.
You should also find out whether there is a fee for arranging certain types of mortgages, like fixed rates for example. There usually are, but the size of the fee, and the arrangements, vary. Some lenders insist that they are paid as soon as you apply for a mortgage, and will not refund if your sale falls through. Payment methods also vary; some lenders allow you to add the fee to your mortgage, while others insist that you pay it as a lump sum.
Another cost to bear in mind is the Mortgage Guarantee Indemnity (MGI) fee, which is normally charged if you are borrowing more than a certain percentage of the value of your home, usually 75 per cent. Again, the size of the fee, and how you can pay it, varies from lender to lender.
Taken individually, these extra fees may seem insignificant, but together they can increase the cost of a mortgage.
George Wise is managing director of NatWest UK Mortgage Services.
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