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Mortgage Protection Insurance

Since the influx of mortgage payment protection claims, many people are weighing the pros and cons of mortgage protection insurance. Sure, it sounds like a good thing at first, but if it is as good as lenders crack it up to be, then why are there so many claims being filed against it? If you are in the process of buying a home and are considering buying payment protection, the following information may prove to be useful. As well, if you have already purchased mortgage protection insurance and need further information in regards to whether or not it was mis sold and if you are entitled to a refund, read on.

Mortgage Protection Insurance Basics

In theory, mortgage protection insurance is supposed to be in place just in case the policyholder suddenly loses income due to loss of job, injury or illness. For a stated number of months, the policy is supposed to make repayments if the loss of income meets the conditions of the policy, barring any exclusions that are written in the small print. Unfortunately, this is where many problems arise. There are so many exclusions that the average person doesn't stand a chance of drawing on the policy's benefits. It was the responsibility of the lender to go over the policy and to disclose all conditions and exclusions whilst making sure the borrower had a full understanding of what was contained therein. Lenders failed to do this which is why there have been so many mis sold mortgage protection insurance claims to date.

Lenders Mis Selling Mortgage Protection

Not only did lenders gloss over important details of the policy, they have been caught blatantly mis selling payment protection insurance by adding it to the loan without the consumer's knowledge and have also used PPI as a contingency for getting the loan. In other words, they were telling the consumer that his or her chances of getting the mortgage were increased if they purchased payment protection and some lenders even went as far as saying there would be no loan if the borrower didn't purchase the cover. If you are wondering why lenders would go to such lengths to sell mortgage protection insurance then stop to consider the fact that it is charged as a onetime premium at the time of closing which increases the amount being borrowed by as much as 56 to 60% in some cases! After that amount is amortised with the principal, you can see just how much they will be making in interest alone.

If you have purchased mortgage protection and feel it was mis sold, you may be due a refund. On the other hand, if you are in the process of taking out a mortgage loan there is one vital piece of information you should be made privy to. The government has recently legislated that borrowers must wait a full 14 days after closing on a loan before they can purchase payment protection insurance. From this time forward, if you mortgage lender tries to sell you PPI at the time of closing, you have the right to refuse and you can report them to the Financial Services Authority. Furthermore, your loan does not depend on whether or not you purchase cover as it is based solely on your creditworthiness and the equity in the home. If you are told otherwise, the lender is trying to cash in on mis sold PPI.

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