Home Buyers’ Protection Insurance is intended to protect home buyers and their funds during the purchasing process. When it comes to purchasing a home, the costs that go beyond the initial deposit can quickly add up. But what if the deal falls through after you’ve paid for mortgage fees, a survey, and a conveyancing solicitor? You may be able to recoup some of your losses if you have Home Buyers’ Protection Insurance in place. In this article, Business Yield examines what home buyers’ insurance cover, if it is worth it, the costs, and how it may benefit you.
What does Home Buyer Protection Insurance entail?
In the event that your purchase falls through, you may be able to recoup some of your conveyancing fees, survey costs/valuation fees, and mortgage/lender fees with Home Buyer Protection Insurance. Our home buyer protection insurance policy is only £60.
Home Buyers’ Protection Insurance, often known as home buyer insurance or gazumping insurance, will cover you if you are gazumped if the seller changes their mind. It’s proven to be a popular product in a competitive industry where chains are at risk of failing.
What Is the Process of Obtaining Home Buyers Insurance?
Purchasing a home can be as stressful as it is exciting, with numerous costs to consider. According to our analysis, the cost of purchasing a house is £30,271, based on the current average property price in the UK. Mortgage fees, conveyancing costs, surveying, removals, and Stamp Duty are all included.
It is important to understand that Home Buyers’ Protection Insurance is not the same as Indemnity Insurance. In the event that the acquisition falls through, Home Buyers’ Protection Insurance can help cover legal and surveying fees, as well as mortgage lending fees.
What are the chances of a purchase failing?
According to Quick Move Now, nearly a third (32%) of property sales in England and Wales fell through before completion in the first quarter of 2023. A property transaction might fall through for a variety of reasons, ranging from a seller changing their mind to a problem with the property survey.
Quick Move Now indicated that 25% of purchases fell through due to a buyer’s inability to acquire a mortgage and that gazumping played a role in 25% of failed deals. The following are the primary reasons why a property acquisition may fail before completion:
#1. Severance in the property chain
A property chain is a line, or “chain,” of buyers and sellers who are tied together because their property transactions are interdependent. Delays can have a ripple effect throughout the supply chain, even causing sales to fall through. A sale that fails at one point in the chain can lead other sales to fail.
#2. Gazumping
Gazumping occurs when a seller accepts one bidder’s offer and then accepts another, generally better, from another buyer. Although this is illegal in Scotland, it is perfectly legal in England and Wales. When a buyer is gazumped, they miss out on the property they wish to buy, even after paying for mortgage, conveyancing, and surveyor fees.
#3. The seller has changed their mind.
Sometimes the seller just decides not to sell the home and withdraws from the deal, leaving you back at square one with your house hunting and, in some cases, out of cash.
#4. Survey Discovered a Problem
If a major and costly issue is discovered during the property survey on the home, a buyer may withdraw from the purchase, leading the sale to fall through. This might be anything from roof damage to a Japanese Knotweed infestation to a severe case of moisture.
#5. Having Difficulties Obtaining a Mortgage
If a prospective buyer is denied a mortgage, even if they have a Mortgage in Principle, the sale cannot proceed unless they can buy the home without a mortgage.
What are the Costs of Home Buyers’ Protection Insurance?
The cost of home buyer protection insurance is a one-time payment. Prices will vary depending on the insurance company, but you should anticipate spending between £50 and £95.
What Does Home Buyer’s Insurance Cover?
Home buyers insurance should cover the majority of scenarios that could arise if a property transaction falls through. TheHome buyers insurance will almost certainly include cover for:
- Fees for conveyancing
- Fees for surveys and mortgage valuations
- Mortgage origination and lender fees
Home buyers insurance policies can be valid for varying lengths of time – typically four to six months – and typically cover policyholders for thousands of pounds.
What Home Buyer’s Insurance Doesn’t Cover?
In a few situations, a property sale may fall through and you will not be covered by home buyer’s insurance. These could include:
- If you are unable to obtain a mortgage,
- If you cancel your order due to delays or irritation,
- You decide not to buy the house because it is not what you expected,
What other insurance will a first-time home buyer require?
When purchasing a home, you should consider the following types of insurance before moving in:
#1. Insurance for structures
Buildings insurance safeguards the structure of your new home against damage by paying the cost of rebuilding or repairing it.
Mortgage lenders are likely to require that building insurance is in place before the house purchase is completed, in case something goes wrong with the property that is costly to repair.
For example, suppose pipe bursts and floods the apartment below between the old owners departing and you receive the keys.
When you buy a home in England, you must have building insurance in place when the contracts are exchanged. Buildings insurance in Scotland often begins on the day you are due to take possession, at the latest.
If you plan to become a leaseholder, the freeholder will normally purchase the building’s insurance and pass the cost on to you via the service charge. So, if in doubt, consult your lease to see if it is your obligation.
If you own an apartment in a building, you may be able to save money by banding together with other owners to obtain a single-building insurance policy that covers everyone. This may be more difficult to organise, and you don’t want to be underinsured or have your cover delayed because the people in the flat above are late with their half of the renewal premium.
#2. Insurance for personal belongings
Contents insurance covers everything within your home that isn’t structurally sound. This covers anything that can be moved, such as drapes, carpets, and white goods, as well as your belongings, which include larger items such as televisions, computers, cameras, and motorcycles.
Some home insurance policies cover house moves, so your belongings will be covered while in storage or being relocated from one home to another. However, relocating cover may be an optional extra, so check the terms. To prevent invalidating your cover, you’ll typically need to hire a professional relocation company and pack everything correctly.
#3. Mortgage payment protection insurance
If you lose your job or are unable to work due to an accident or illness, mortgage payment protection insurance will cover the cost of your mortgage payments.
The cover normally pays out for 12 months or until you are able to return to work, whichever comes first. If you are employed, self-employed, or a contract worker, you can apply for MPPI. However, keep an eye out for exceptions.
#4. Insurance on one’s life
When a person has a home and a family, life insurance becomes more important to them. It’s worth considering who will pay off the mortgage if something were to happen to you.
Life insurance typically pays out in the form of a lump sum to assist you in repaying any obligations and providing funds for your loved ones to live on. It can also be set up to supply them with a steady income.
If you’re thinking about getting a mortgage, keep in mind that some lenders may need you to get life insurance so they know the loan will be repaid if you die.
Is there a cap on how much I can get back on Home Buyers’ Protection Insurance?
Yes. Policies vary, and the amount you can claim is determined by the amount you paid for your coverage.
Legal fees of up to £750, mortgage arrangement fees of up to £250, and valuation fees of up to £500 are likely to be covered by a basic policy.
More expensive insurance, on the other hand, will allow you to claim more, or possibly the full amount you spent trying to buy a home.
Is Home Buyers’ Protection Insurance a Legal Requirement?
Home Buyers’ Protection Insurance is not required. It is not a legal requirement, and any sale can be completed without it.
However, purchasing a home is an expensive process. Spending a few hundred pounds to protect yourself against losing many thousand dollars in fees and purchasing costs may make sense.
When in the moving process do I acquire insurance?
You can purchase Home Buyers’ Protection Insurance as soon as your offer is accepted.
However, it must be completed within a specific time frame. For instance, within a week after asking your solicitor to begin work on the conveyancing.
How long is the Home Buyers’ Insurance policy valid?
This form of insurance often lasts 120-180 days from the date you purchase it.
That means you’ll have up to six months to finish your project before having to renew your cover.
Do I need Home Buyers’ Insurance if I’m buying in Scotland?
Once an offer has been accepted in Scotland, it must be honoured. However, home sales can fall through for a variety of reasons other than gazumping.
So, whether you’re buying in Scotland, England, Wales, or Northern Ireland, Home Buyers’ Protection Insurance can be a good idea.
There are some significant distinctions between buying a home in Scotland and elsewhere in the United Kingdom.
How can I file a claim with my Home Buyers’ Insurance company?
Simply contact your insurer if you need to file a claim.
About your policy paperwork, you’ll discover information on the best approach to contact us. Your policy scheme reference and schedule number will be required.
They will almost certainly request additional information from you. This may be an email proving that you were gazumped. It might be proof that your lender would not provide you with a mortgage.
Home Buyers’ Protection Insurance typically includes no excess, so you won’t have to worry about paying out to make a claim. Check your policy information to ensure that this is the case with the policy you choose.
Conveyancing with no sale and no fees
No Sale No Fee Conveyancing, like Home Buyers’ Protection Insurance, is intended to safeguard the buyer financially during the property-purchase process. No Sale, No Fee Conveyancing is a conveyancer agreement that states that if the purchase of a property falls through, you will not be required to pay their legal fees.
Please keep in mind that this does not mean you will not suffer any costs if the sale does not go through. Any third-party costs expended on your behalf, including searches and surveys, must be paid to your conveyancer regardless of the outcome of the sale.
No Sale No Fee Conveyancing isn’t a complete substitute for Home Buyers’ Insurance Protection because it just covers the conveyancing costs. It is also important to note that No Sale No Fee Conveyancing is frequently more expensive than utilising a standard conveyancing solicitor.
Home Buyer Insurance FAQs
Is home insurance mandatory for mortgage?
You can legally own a home without homeowners insurance. However, individuals who have a financial stake in your homes, such as a mortgage or home equity loan holder, will almost always demand it to be insured.
What happens if you get gazumped?
You may have already made an offer that was approved by the seller and then spent money on surveys, searches, and other fees. The seller then decides to sell the property to someone else, and you get gazumped. This would imply that you would lose the money you spent preparing to buy the property.
Is unoccupied home insurance more expensive?
Unoccupied property insurance is typically more expensive than conventional home insurance. This is because insurers regard unoccupied properties to be a higher risk.
