Why Mortgage Companies Insist on Buildings Insurance
In the UK, mortgage lenders will refuse to give you a mortgage without you taking out building insurance. If you own the property it is your responsibility to arrange for the building insurance. If you are a tenant then it's your landlords' responsibility to ensure the building is insured.
Mortgages are Secured Loans
Mortgage companies use your property as security on the loan, so it's in their best interest to ensure this asset doesn't lose value. Buildings insurance protects your property from damage caused by external factors. If you didn't have building insurance and your property was to be damaged, then you may not be able to afford to repair it back to market value. This would increase your risk to the mortgage company and if they were to repossess your home, they may end out of pocket.
Insurance Reduces Risk
Building insurance basically reduces the risk you pose to the mortgage lender. The majority of lenders offer their own building insurance product but shop around as you may be able to find it cheaper elsewhere.
DISCLAIMER: All content is for guidance only and does not constitute individual financial advice.
www.homeinsuranceinfo.co.uk is not authorised by the FSA to advise on insurance matters.
