When to buy insurance for a new property?
When to Buy Insurance for a New Property?
Going through all the paperwork involved in buying a new home can be a bit overwhelming. However, their neglect may lead to a financial catastrophe. For example, The Guardian described the story of a British family having to pay a bill of £ 50,000 to repair damage to a home that did not officially belong to them. How is such a situation even possible and what can you do to protect yourself from similar problems? We hope to fully answer these questions in our article.
Case study - history of a British family
In the aforementioned text, The Guardian, the parents of a young child decided to buy a new home. After paying the deposit, they have completed the so-called exchange of contracts. However, they were not allowed to stay on the property until the purchase was finalized (with English completion), which usually takes a few extra weeks. The family did not take out home insurance so that the property was already protected when the contracts were exchanged, and that was the biggest mistake. The building was partially destroyed by the flood before the purchase was finalized. The family then faced the following choice: to pay the bill for repairing the damage or withdraw from the purchase. Even though the second option seems reasonable, the pair would lose £ 50,000 on their deposit. In other words, the money would be lost anyway.
This unfortunate situation was perfectly legal under British law. The family obviously blamed their lawyer for not informing them of the potential ramifications of not insuring the property. The lawyer, in turn, insisted that it was the buyer's duty to read and understand the document that he signed. Even if it is 40 pages long.
The question is if you decide to take such an important step as buying an apartment, would you like to receive the described level of service from your mortgage advisor or lawyer?
Choosing the right mortgage adviser in the UK
All advisers at Five Star Mortgages realise that it is imperative to insure your property before replacing contracts. We would never ask you to sign any documents without making sure you fully understand them. In addition, we are always happy to provide you with additional advice so that you are aware of the potential consequences of each of your decisions. As choosing the right lawyer is also important, Five Star Mortgages can recommend those professionals who will always act in your interest.
Exchange of contracts and finalisation of the purchase
Before we get to our conclusions, we decided to prepare a short guide on the differences between exchanging contracts and finalizing a purchase. All information is provided in the table below.
Contract Exchange
Term
Purchase Completion
Purchase withdrawal
Before exchanging contracts, you can withdraw from the purchase.
Before this stage, you cannot withdraw from the purchase. If you withdraw, you will lose your deposit.
Property Ownership
You are not the owner of the property yet.
When you finalise your purchase, you become the new owner of the property.
Payment
You pay the deposit.
Your bank makes a transfer to the seller's lawyer for the remaining amount.
Insurance
From the moment the contracts are exchanged, your future home should be insured by you.
You shouldn't insure your home until you've finalised your purchase. If anything happened before this day, you will have to pay for it.
Buying a new home in the UK - when should you take out insurance?
This article as well as the history of the British family have proved how crucial it is for our future property to be insured at the time of exchanging contracts. Don't risk your family welfare - choose a mortgage broker who will support you throughout the process of buying a new home. If you have any questions related to the exchange of contracts, finalizing a purchase or a commercially available home insurance offer, please get in touch with our friendly team .
Get in touch today for a FREE consultation
Book an appointment through our form or call today on 0300 303 4676 to speak with one of our experienced financial advisors.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
