07 Jun Mortgages With No Insurance – Is That Possible?
There were times when a life insurance policy was a mandatory requirement to grant a mortgage and the lender would insist that the policy be assigned to themselves as owner. Those days are long gone as the pressure to increase profits have risen. Over time underwriting burdens have stood in the way of funds being released, profits made and bonuses paid. Think interest only loans – a new development in the 1990’s and early 2000’s. Or the rise of the buy to let market in the 2000’s. An active remortgage market. Product transfers for exisiting clients.
The ease of lending was driven for one reason – profits. Sacrificed? The mandatory requirement to pay off the loan. (Be in debt – forever – perfect for banks). Buy to Let drives property prices skywards as anyone can “get rich quick” prohibiting property owernship for the masses (no this is not Jeremy Corbyn’s manifesto) and life cover – to ensure the debt is repaid and the property ownership secured. Why would the bank be overly concerned, when they can re-possess and should be able to sell the property at an inflated value? The development of Microsoft EXCEL allowed them to very quickly compare profits made with looser underwriting versus having to re-possess more properties.
Only in the darker times for the property market do underwriting processes increase and truthfully that is only to slow down lending rather than for an amended feeling of moral good.
Meanwhile we notice that claims on insurance increase. Are our clients getting unhealthier? We think its more due to the higher average age and more numerous number of clients we are lucky and grateful enough to help. There have in the last 12 months alone been some very sad stories and some remarkable recoveries. Whilst we always wish for the latter and stand by in amazement when they happen – we can determine no way of predicting who will be claiming.
So – mortgages with no insurance – is that really a possibility? Or Russian roulette with your greatest financial asset?