Skip to content
  1. Home
  2. The Mortgage Brokers Blog
Print this page

If MP’s are claiming for mortgage interest don’t the public own the property?

I can’t help but get embroiled in the MP’s expenses debate seeing as it’s the only subject the BBC news feed on my website seems to be covering.

I have just this chestnut to offer;

If MP’s are claiming for their second homes but they are actually paying a mortgage with that bill then surely WE the taxpayer own the property?

I was just wondering because I am pretty sure it stipulates in their expenses rules that they are not allowed to gain financially from any claims they make. And I think buying a house for them might constitute a financial gain!

Accident sickness and unemployment cover explained

With rising unemployment and the continued economic downturn it’s unsurprising that mortgage brokers and insurers alike have noted big increases in the number of enquiries about mortgage payment protection insurance or ASU as it is otherwise known so I thought now would be a good time to discuss how the cover works and what type of cover is available.

Few homeowners are aware that income support for mortgage interest is now only available 39 weeks after a redundancy or injury etc leave you out of work, and certainly very few would continue to receive pay at full level for this length of time or even have sufficient savings to cover their mortgage and lifestyle for this duration, and this is where the need for ASU cover comes in.

These products are designed to provide cover where you are unable to work due to an accident, sickness or in certain circumstances unemployment and to help support the payment of important bills such as a mortgage, insurance, utilities & food etc. They typically will provide a benefit for between 12 and 24 months.

ASU is usually arranged with a deferment period option which may be 4, 8, 12 or 24 weeks for example which is the amount of time from being unable to work prior to being able to make a claim on the policy, in general the longer the deferment period the cheaper the cover. You can also decide whether it will then pay back to day one (i.e from the date of being out of work) or from the end of the deferment period which again will usually reduce the premium.

It may give you the option whether or not to include unemployment and this will certainly only cover you for involuntary unemployment (i.e if you are dismissed or resign there will be no cover). For the self employed care will need to be taken as many policies will not cover this type of employment or supplementary income from freelance work. Another important point is they will generally require you to have been in permanent employment for a minimum of a year, and for the policy to have run for at least 3-6 months prior to a claim for redundancy. And they may exclude redundancy where you could reasonably have expected it prior to arranging the cover so if your firm has announced job cuts in the future you need to take care that the cover will not be invalid.

Cover can normally be arranged to cover the cost of your mortgage and insurances, with the option to add extra cover up to a maximum percentage of your income or percentage above your mortgage so that you can’t be better off receiving the benefit than if back at work, and there may be the option to waive the premiums from the point of being out of work (i.e you won’t be able to claim until the deferment period is complete but you can stop paying the monthly premium when initially out of work) again though this will usually make the cover more expensive.

As usual if you are interested in this type of protection it makes sense to speak to an independent mortgage or financial advisor prior to making a purchase and make sure it suits your needs fully as many wont charge a fee for arranging the cover.

A good time to brush up your credit score

With many borrowers now falling fowl of credit scoring it’s as good a time as any to take simple steps to improve you’re credit score: here’s some tips on how to do it.

Improve payment history – Simple budgeting steps can greatly improve your credit score, make sure you always make your minimum payments by setting up direct debits.

Work to a budget – It can be a lot easier to stay on budget if you work out your fixed monthly bills (mortgage, car insurance, gas etc) and transfer your spending money by standing order to another account. It makes it much simpler to know where you are when you come to the cash machine, just make sure you always leave a little extra in the bill account in case they are higher than expected.

Update your information – Make sure all your important information is up to date, human underwriters still make a lot of decisions so it’s always good to make sure everything ties together such as driving license, bank details and electoral roll etc are at your current address.

Limit credit applications – Every time you apply for credit a search imprint is left on your credit file. If these start appearing in quick succession a lender may think you’re in difficulty so if you’re looking at a new phone and a store card it may be best left till after the mortgage application.

Check your credit report – It’s now possible to check your own credit report so make sure that the information they have is correct, particularly with regards to public record information about CCj’s, Repossessions and bankruptcies and the financial connections section.

If there’s anything on a credit report you dont understand or particularly if you are regularly refused credit for no apparent reason it may be worth speaking to a mortgage broker or advisor to find out more.

Should Affordability be regulated?

Hi and welcome to this the first post of the brokers blog.

As my first topic I thought I would comment on Gordon Browns recent suggestion that there may be a move to regulate the affordability models used by banks and building societies when determining how much to lend to a borrower.

I am probably one of few people in an industry based around percentage commission to think that this is a good idea in essence, but I am all too aware of the dangers of getting it wrong.

The point being the dual regulation system we have currently with Mortgages being FSA Regulated and non residential and second charge lending being essentially unregulated outside of the limited involvement of the OFT (Office of fair trading).

There’s no point regulating affordability on first charge residential loans without bringing second charge loans and Buy to Let into the same body of regulation, or the effect will be to encourage further the misuse of Buy to Let mortgages for the purposes of getting a larger loan leaving the market still open to abuse and also encouraging people to take more expensive second charge lending for debt consolidation.

Its important not to get carried away with the sentiment of the moment and bodge regulation just because it seems like a good idea to bring the banks into line with each other. Perhaps the question should be is it time to regulate all non-commercial lending under the same body (and I include Buy to Let in non-commercial) as well as limit the affordability calculation used?

The answer is probably yes. However even then there is a very important thing to consider, how do you regulate that without leaving a significant number of people locked out of a re-mortgage? Because whilst it is favourable to have a control on the fire of house price inflation it definitely isn’t a good idea to lock people on existing 4 to 5+ times income Mortgages out of competitive new rates, at the same time as leaving them exposed on their variable rate to every change of bank base rate.

Whatever the government does decide to do on this they need to think carefully about how it can be done without leaving thousands of people in even more danger of mortgage default.

Another important aspect to it is that it will be likely to further the reduction in house prices, which would currently leave people deeper in negative equity. There are still many areas where the average first time buyer simply can’t afford to buy at 4 times main income, so the market is still generally overpriced in many areas, and bringing in this type of regulation could worsen the pain of the credit crunch for many particularly those who have pushed their income that bit further and are already treading water.

So in my opinion whilst it’s definitely needed, a bull in a china shop approach could be nothing short of disastrous.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. WE TYPICALLY CHARGE AN ADVICE FEE OF £299 PAID UPON FULL MORTGAGE OFFER. SOME BUY TO LET AND COMMERCIAL LOANS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY
© RIGHTMORTGAGEADVICE.CO.UK 2010-2020
RIGHTMORTGAGEADVICE.CO.UK IS AN APPOINTED REPRESENTATIVE OF JULIAN HARRIS MORTGAGES LTD, AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY. FSA NO 304155
THE FINANCIAL OMBUDSMAN SERVICE (FOS) IS AN AGENCY FOR ARBITRATING ON UNRESOLVED COMPLAINTS BETWEEN REGULATED FIRMS AND THEIR CLIENTS. FULL DETAILS OF THE FOS CAN BE FOUND ON ITS WEBSITE AT WWW.FINANCIAL-OMBUDSMAN.ORG.UK

Get advice
Request mortgage advice
close the form
Your details
Contact details
Enquiry details

Request impartial advice from one of our qualified mortgage brokers. By pressing submit you agree to the Terms & Conditions and Privacy Policy.