Mortgage protection insurance waiver?

S

Starbright

Guest
Hello folks, any & all advice much appreciated!

I've got loan approval on a property which I'm due to snag within the next couple of weeks. I've applied through an insurance broker for mortgage protection insurance, but on the form I filled in I had to disclose that I have a hereditary family condition which may or may not become active later in life (probably 20+ years down the line - the term of my loan will be 25 years). There is an outside chance this condition could be life threatening but no affected family members have died as a result of it. I was told by my insurance broker that it is likely that I will be refused mortgage protection insurance as a result of this condition.

I've had conflicting advice as to where this situation leaves me. My insurance broker insists that everyone has a statutory right to a mortgage and that when I get the letter from an insurer saying I was refused mortgage protection cover, I need to present this letter to the lender who is then legally obliged to waive the requirement for mortgage protection insurance. I will then simply get the loan without any mortgage protection cover.

My mortgage broker, on the other hand, is panicking and told me that the lender (or any other lender) has no obligation to give me the loan as I won't have mortgage protection and she thinks I'm going to struggle to get a loan at all.

Anyone have any ideas which version is accurate?

Any insights would be greatly appreciated!
 
This question (and variations) has been asked here several times before. Try searching for mortgage protection waiver.
 
A waiver for life cover is allowable in your circumstances, however, not all lenders operate on that basis depending on their own lending policy. Some lenders will not lend without the life cover, others will allow you sign the waiver, you need to find out which camp your lender is in and if necessary change lender fast.
 
There is no legal obligation on a lender to offer you a loan without life cover. Most lenders will look at the circumstances, e.g. are you joint-named on the mortgage? If so, could you partner meet the repayments? Is the loan a high % of the property value?
 
Thanks for the responses.

I have found out more about this scenario from talking to my broker which may be of help to others in the same boat. He insists that everyone does have a "right" to a mortgage but that there is no legal obligation on individual lenders to process a loan if the borrower is denied mortgage protection/life cover. I find this statement somewhat difficult to reconcile!

Anyway, he said applications for a waiver on life cover are assessed on a case by case basis but several factors may aid the application. These can include the existence of an income protection scheme run by one's employer, ill health benefits in one's pension plan, death in service gratuities/benefits, a low loan:value ratio and a lack of dependants. He stressed again that none of these can bind a lender to allow the life cover waiver, but they may help the application.
 
Starbright said:
He insists that everyone does have a "right" to a mortgage
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I don't believe this to be true. No lender is obliged to give any particular borrower a loan.
Anyway, he said applications for a waiver on life cover are assessed on a case by case basis but several factors may aid the application. These can include the existence of an income protection scheme run by one's employer, ill health benefits in one's pension plan, death in service gratuities/benefits, a low loan:value ratio and a lack of dependants. He stressed again that none of these can bind a lender to allow the life cover waiver, but they may help the application.
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The Consumer Credit Act requires that all owner occupiers have mortgage protection life assurance cover for a mortgage unless a waiver applies due to age (e.g. over 50) or medical reasons.

126 Mortgage protection insurance.
 
126.—(1) Subject to the provisions of this section, a mortgage lender shall arrange, through an insurer or an insurance intermediary, a life assurance policy providing, in the event of the death of a borrower before a housing loan made by the mortgage lender has been repaid, for payment of a sum equal to the amount of the principal estimated by the mortgage lender to be outstanding in the year in which the death occurs on the basis that payments have been made by the borrower in accordance with the mortgage, such sum to be employed in repayment of the principal.

(2) Subsection (1) shall apply as respects all housing loans except—
( 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,
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That would seem to indicate that if a person is uninsurable, i.e. a chain smoker, weighs 30 stone, drinks battery acid etc, then the provisions of section 126 (1) do not apply. Would I be right there?
 
I guess so but there is no guarantee that a lender will grant a waiver in such circumstances.
 
Check with the lender in question, First Active & Ulster definetly accept waivers where you have been refused life cover or it is prohibitively high without any hassle.
 
agapanthus said:
Check with the lender in question, First Active & Ulster definetly accept waivers where you have been refused life cover or it is prohibitively high without any hassle.
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I've been told EBS do too.......
 
agapanthus said:
Check with the lender in question, First Active & Ulster definetly accept waivers where you have been refused life cover or it is prohibitively high without any hassle.
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If there is only one borrower and the loan represents a high percentage of the property value, First Active and Ulster Bank won't always accept a waiver.
 
The banks will ask you to apply to at least 2 or 3 life assurance companies. They are usually satisfied when they have a number of letters stating that you have been declined life assurance due to medical history.

I am an insurrance broker and come across this very often.
 
While getting letters of decline from a few life assurance companies may aid your case/appeal for the life cover to be waived, lenders are not under obligation to do so.
 
PM1234 said:
While getting letters of decline from a few life assurance companies may aid your case/appeal for the life cover to be waived, lenders are not under obligation to do so.
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I agree fully. The primary issue is the detail of the loan application itself, as described above. Best thing to do is to ask a prospective lender before going to the trouble of applying to several life asurance companies only to discover that no lender is going to offer to waive the requirement for life assurance anyway.
 
An update on this in case other people are similarly affected.....

I had no real problems getting the requirement for mortgage protection insurance waived from several lenders after being refused mortgage protection insurance. As stated by several posters above, however, this was because of the particular circumstances of my own financial position & loan and lenders will examine each application for a waiver on a case by case basis.

What I would say is that if you think you are likely to be refused mortgage protection insurance, give yourself plenty of time with the application. It took six weeks between my initial application for mortgage protection insurance and the issuing of the rejection letter. This caused me plenty of stress as it held up my entire mortgage application. The seller was not happy with the delay and my purchase could easily have been jeopardised. I assumed it would only take a couple of weeks between application and rejection - I would advise others not to make a similar mistake!
 
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