Buying a home is exciting but there’s always a possibility that something may go wrong and the purchase falls through. By that time, you’ve already paid a considerable amount of money to cover valuation and survey fees, legal costs and mortgage lending costs.
Protecting you against these financial losses, home buyers protection insurance covers you if your purchase falls through due to events that are out of your control. So, what exactly is this type of insurance and is home buyers protection insurance worth it?
What is home buyers protection insurance?
If your purchase falls through because of events that are out of your control, home buyers protection insurance enables you to claim back some of the upfront costs you’ve paid. You may be gazumped, for example, or the seller may simply change their mind and withdraw from the transaction. With this specialist insurance in place, you can recoup some of the money that you’ve already paid. This can include the fees paid for a valuation and survey, the mortgage arrangement fees and the conveyancing fees.
Who can benefit from home buyers protection insurance?
Whether you’re a first-time buyer, a home mover, buying a second home or investing in a buy-to-let property, you can benefit from the financial safety net that home buyers protection insurance offers.
What can cause a purchase to fall through?
Unfortunately, not all property purchases are smooth transactions, with one in three falling through. The common reasons for this include:
- This is when, having already accepted your offer, the seller accepts a higher offer from another buyer.
- The property is down-valued. The valuation may show that the property is worth less than the agreed purchase price. In this case, the lender may either lend you less money or refuse to offer you a mortgage.
- The survey has highlighted issues with the property. The property may have a major issue that you were unaware of, such as subsidence. This may result in you pulling out of the transaction.
- The seller withdraws from the transaction. This can be for any reason, such as simply changing their mind.
- The seller isn’t entitled to sell the property. Your solicitor may discover that the seller doesn’t have a legal right to sell the property.
- The property chain collapses. If any party withdraws from their transaction, the property chain can collapse.
- The searches have revealed issues. Previously undisclosed issues may be highlighted when the searches are conducted.
- A change in your employment. You may be made redundant or find out that you have to relocate for your job. Any changes in your employment may leave you with no choice but to withdraw from the purchase.
What does home buyers protection insurance cover?
Insurance providers offer different levels of cover but, generally, you can make a claim via your home buyers protection insurance if:
- The seller withdraws from the transaction
- The property valuation is significantly less than the accepted offer price
- You’re gazumped
- The seller has no legal entitlement to sell the property
- The property chain collapses
- You have to relocate for work or you’re made redundant
- The lender requires rectification works to be carried out and the costs are in excess of 10% of the accepted offer price
- The property becomes damaged once the cover has started and the repairs will cost more than 10% of the property’s value
- Significant issues are highlighted in the survey
- A local authority search identifies that a compulsory purchase order affects the property
What’s not covered by this insurance?
First, it’s important to note that you can’t claim retrospectively. This means that any fees you’ve paid before taking out this insurance won’t be covered. Also, this insurance only covers you for issues that are out of your control. Therefore, cover is not provided if:
- You change your mind and withdraw from the purchase
- You intentionally cause a delay, resulting in the purchase not completing
- A solicitor or licensed conveyancer isn’t instructed
- You were aware that a survey had been carried out within the previous 90 days and that it highlighted issues that may cause the transaction to fall through
- You agree to voluntary redundancy
- The property is subject to sealed bids
Is home buyers protection insurance worth it?
Buying a home is expensive and the initial fees you have to pay soon mount up. These include valuation and survey fees, mortgage lending costs and legal fees. They can cost you hundreds if not thousands of pounds. Unfortunately, one in three purchases falls through and if this happens to you, you can be left seriously out of pocket.
Home buyers protection insurance isn’t compulsory but it helps to protect your money should something go wrong. With this cover, you can reclaim some or all of your money, depending on the level of protection you have. It makes sense to have this financial safeguard so that you don’t lose your hard-earned money and have to start from scratch for the next property you have an offer accepted on.
Minimise your financial loss with home buyers protection insurance
Be prepared as you begin the home-buying process and protect yourself against unforeseen issues. Our mortgage and protection brokers can arrange home buyers protection insurance for you as soon as you need it. Just give us a call on 01322 907 000 and have peace of mind that you can recover some if not all of the upfront expenses payable when buying a home.