Lender says I activated my mortgage protection too early - options?

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mustang01

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Just about to draw down and facing a major hurdle that I’m not sure how to resolve. I activated my mortgage protection policy a couple of months ago after arranging last year in good time for my mortgage and ahead of my new build being completed. But the house has been delayed time and time again and now the bank is rejecting the policy, saying I activated in too early and it’s three months out of synch with the end of the mortgage term.

I’ve been trying to get the life company to amend accordingly but they are hemming and hawing as to whether that’s possible without kicking all back to underwriting. Any other options available to me besides starting again with another policy or provider which could take weeks to sort since the last one triggered a medical because of my age (50).
Seriously panicked now that the bank will pull the funding if I can’t get it sorted and then I’m in trouble with the builder for not completing within the time frame for closing.
Wasn’t aware that starting the policy too early would cause such problems, so if anyone has any suggestions or has come up against this before I’d be grateful!
 
Ask the insurance company to issue you a new policy and cancel the old one.

Start the process with another company in case that does not work out.

Brendan
 
If your income will still qualify you for what you want with a one year shorter term on mortgage that is the route I would try, however it will require a new loan offer issued as well to be signed so a bit of a delay too but shouldn't be long. It's kind of petty of the bank as realistically the amount o/s when you have 3 months to go to end of mortgage term will be small but they are a bit hampered by the legal requirement to have one in place.

That said would the bank let you sign a waiver as you are over 50? That in theory would do away with the need to have a mortgage protection policy but as they and you know you do have one but it would cover off the 3 months uncovered bit!

Also think for the sake of 3 months the insurance company could amend it but would not be unusual for any change to mean you have to start again with application.

Ask bank about waiver, that covers their ass legally and only delays you a couple of days.
 
One of the pillar banks waived the requirement for mortgage protection for me as I was over 50 so it is not a legal requirement. I had to sign a waiver to avail of it.
 
Flybytheseat said:
One of the pillar banks waived the requirement for mortgage protection for me as I was over 50 so it is not a legal requirement. I had to sign a waiver to avail of it.
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It is a requirement but there are 4 reasons, one being over 50, that can warrant a waiver, however it is up to the individual bank's business policies whether or not they give the waiver, they don't have to.
 
Brendan Burgess said:
Ask the insurance company to issue you a new policy and cancel the old one.

Start the process with another company in case that does not work out.

Brendan
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They already said they won’t do this without a new application, which will take way too long. And another life company even longer if need for a medical.
I can’t believe this kind of thing does t happen on the regular when new build drawdown dates get changed around all the time yet neither will budge. The stress of it is insane.
 
mustang01 said:
I can’t believe this kind of thing does t happen on the regular when new build drawdown dates get changed around all the time yet neither will budge. The stress of it is insane.
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I don't think it does happen that regulary as most people do not activate the policy until it is needed for drawdown. I would never have advised someone to start the policy until drawdown was in sight, now of course if that goes on for a long time the life company will probably need a new declaration of health but if nothing has changed that is a minor delay.
 
The policy was approved last year and I activated it in time for February drawdown which was the last time I was promised a closing date, but then moved again. I forgot about the policy but had no idea that the timeline would be such a problem, especially when I over insured the amount, though not the term.
Doubt I’d qualify for the waiver which seems to have quite rigid conditions but will give it a try.
Any insurers who wouldn’t require medical for my age or do they all need it once you hit 50? Seeing lots of online brokers advertising 24 hour cover etc but probably that’s just for the young!
 
mustang01 said:
Doubt I’d qualify for the waiver which seems to have quite rigid conditions but will give it a try.
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The rigid conditions will be on the lender's side, it's their call whether or not they accept it but the reasons allowing them give one are below and it's ANY of them, not all of them so you qualify on the very first one. You don't have to qualify under any of the others, they are just all of the circumstances that can be covered by a waiver. Again you don't need to fit all of them just one. But it is at the discretion of the lender whether they are willing to accept a waiver, definitely worth asking them. As I said they are already covered as they know you have a policy, this just legally covers them for the last 3 months, ticks the boxes as such!


Exceptions to the legal requirement to have mortgage protection insurance

You do not have to take out mortgage protection insurance if:

  • You are over 50 years old
  • The mortgage is not on your principal private residence (your home)
  • You already have enough life insurance to pay off the home loan if you die
  • You cannot get this insurance, for example, because of a current serious illness or dangerous job
Above is from Citizens Information website which is a simplified version of the actual piece from the Consumer Credit Act 1995


Below is from the Act
a) where the house in respect of which the loan is made is, in the mortgage lender's opinion, not intended for use as the principal residence of the borrower or of his dependants,
(b) loans to persons who belong to a class of persons which would not be acceptable to an insurer, or which would only be acceptable to an insurer at a premium significantly higher than that payable by borrowers generally,
(c) loans to persons who are over 50 years of age at the time the loan is approved,
(d) loans to persons who, at the time the loan is made, have otherwise arranged life assurance, providing for payment of a sum, in the event of death, of not less than the sum referred to in subsection (1).
 
Monbretia said:
The rigid conditions will be on the lender's side, it's their call whether or not they accept it but the reasons allowing them give one are below and it's ANY of them, not all of them so you qualify on the very first one. You don't have to qualify under any of the others, they are just all of the circumstances that can be covered by a waiver. Again you don't need to fit all of them just one. But it is at the discretion of the lender whether they are willing to accept a waiver, definitely worth asking them. As I said they are already covered as they know you have a policy, this just legally covers them for the last 3 months, ticks the boxes as such!


Exceptions to the legal requirement to have mortgage protection insurance

You do not have to take out mortgage protection insurance if:

  • You are over 50 years old
  • The mortgage is not on your principal private residence (your home)
  • You already have enough life insurance to pay off the home loan if you die
  • You cannot get this insurance, for example, because of a current serious illness or dangerous job
Above is from Citizens Information website which is a simplified version of the actual piece from the Consumer Credit Act 1995


Below is from the Act
a) where the house in respect of which the loan is made is, in the mortgage lender's opinion, not intended for use as the principal residence of the borrower or of his dependants,
(b) loans to persons who belong to a class of persons which would not be acceptable to an insurer, or which would only be acceptable to an insurer at a premium significantly higher than that payable by borrowers generally,
(c) loans to persons who are over 50 years of age at the time the loan is approved,
(d) loans to persons who, at the time the loan is made, have otherwise arranged life assurance, providing for payment of a sum, in the event of death, of not less than the sum referred to in subsection (1).
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Thank you very much for this, I will definitely give it a try, though I’m still at 50 age-wise, not over as such (which I’d have thought meant 51 onwards) but everything crossed!
 
How tight is mortgage in terms of the lenders affordability criteria?

Usually I'd suggest -like others have - cancelling and replacing the mortgage protection - but if that's not an option then the alternative is to reduce the mortgage term by the couple of months to align it with the mortgage protection.

The fact you have recently, and successfully, taken out a mortgage protection policy with the insurer might mean reapplying may not be as torturous as it previously was. It may also count against you if you're looking for a waiver

If time is of the essence I'd be juggling all options (in particular reducing mortgage and replace protection) to see what budges first.
 
Looking for a waiver won't come against a borrower, you either get it or you don't and in this case there is actually cover on place just 3 months short.

Mortgage terms are usually in years so would be shortening by a year, if that's affordable then that's fine too but would require reissue if loan offer.

A waiver if granted would allow drawdown go ahead and borrower could be applying for new life cover in their own tome without pressure although I wouldn't bother for sake of few months.

I'm actually surprised that no one on the lending side has suggested a waiver! It would be the obvious answer in this case if there is pressure to drawdown and even for waiver adverse lenders this is an easy decision as there is actually cover there.
 
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Monbretia said:
Looking for a waiver won't come against a borrower, you either get it or you don't and in this case there is actually cover on place just 3 months short.

Mortgage terms are usually in years so would be shortening by a year, if that's affordable then that's fine too but would require reissue if loan offer.

A waiver if granted would allow drawdown go ahead and borrower could be applying for new life cover in their own tome without pressure although I wouldn't bother for sake of few months.

I'm actually surprised that no one on the lending side has suggested a waiver! It would be the obvious answer in this case if there is pressure to drawdown and even for waiver adverse lenders this is an easy decision as there is actually cover there.
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The waiver might work but they are meant to be an exception for those who can't get protection not for those who inadvertently jumped the gun on activating a policy early.

It comes down to the lenders risk tolerance. Looking at it from their perspective they would be taking on extra risk over the life of the loan because of bad timing as opposed to some permanent issue/condition. If it works then great for the OP but it would make me wonder why they look for mortgage protection at all.

I'm not saying don't try but I wouldn't be putting all my eggs in that basket by any means.

On the mortgage duration it's perfectly normal to have it in fractions of years. Happens all the time for switchers - or perhaps I was (literally) the odd one who didn't switch on my mortgage anniversary.

Yes it would require another mortgage application but again - as in the case of the mortgage protection - the OP has already done the heavy lifting having gone through that process once. If all that is changing is the the term -be it a few months or a year less - a new loan approval could be issued in a couple of weeks.
 
The waivers are also for anyone over 50 or someone buying a BTL and not just those that can't get cover, the bank are not taking on any worthwhile risk here other than the final 3 months of the mortgage payments which in fairness can't be too big! I would have no hesitation if I were the underwriter signing of on that waiver especially when there is practically full cover in place.
 
Monbretia said:
The waivers are also for anyone over 50 or someone buying a BTL and not just those that can't get cover, the bank are not taking on any worthwhile risk here other than the final 3 months of the mortgage payments which in fairness can't be too big! I would have no hesitation if I were the underwriter signing of on that waiver especially when there is practically full cover in place.
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I wish you were. Bank not even entertaining the waiver, say I need to prove I’ve been turned down for cover and they already know that’s not the case. My fastest option is to reapply for a fresh LOI or different policy provider. Such a dose…
 
mustang01 said:
I wish you were. Bank not even entertaining the waiver, say I need to prove I’ve been turned down for cover and they already know that’s not the case. My fastest option is to reapply for a fresh LOI or different policy provider. Such a dose…
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That's very disappointing! I really had hoped you were just dealing with somebody inexperienced who literally had not thought of a waiver to just get the drawdown across the line and sort the issue afterwards!

It's quite simply not the case that you have to be turned down for cover to get a waiver but as I said initially it is up to the individual bank whether or not they offer it under which ever circumstance applies to a particular customer but at least they should just say they are not offering it and not be trying to say you don't fall under the requirements because you do at age 50. If they don't want to give it they don't have to but it's about the least risk use of one I've even come across.

Looks like quickest route will be reapply to existing policy provider, maybe they can be sensible and see that you have only recently completed a policy with them, they will still be going back for medical evidence to ensure no changes since last application but I think it should be the quicker option than going with a new provider.
 
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