Once you have found your dream real property and secured your first mortgage, how can you make sure that the security backing up the loan holds value enough to pay it off should it be needed?
As the first mortgage lender will be taking the real property as security for the loan, they will insist that you arrange home insurance on the house. This will keep them certain that should your house be damaged through fire, flood or a lorry runs into it, the insurance company will rebuild back to the original value, thus making sure that the loan security is still intact.
If home insurance was not in place, should the physical house be damaged then the security value would be lower than the loan and you could end up having to pay back a loan when there is no house left.
There are many providers of home insurance, from Aviva to Tesco and each will offer a slightly different package. It is imperative to research what each policy covers to make sure that it is suitable for your requirements.
Some things to look for when arranging home insurance;
- What is excluded
- Is sanitary wear included
- Do you get reimbursement for alternative accommodation
- Are architects fees covered should you need a rebuild
- What is the rebuild value
There can be confusion over what the difference between home insurance and contents insurance is. Being simple, if you could tip your house upside down, everything that stayed in place is covered by house insurance and everything that drops out is covered by contents insurance. So by definition, your home insurance should cover sanitary ware, ceramic hobs and kitchen units as well as the physical bricks and mortar of the house.
Home insurance is renewable annually and as there are so many competitors to choose from you can be sure that you will be able to get a decent policy for a very small premium. One thing can be certain with home insurance is to shop around for the best value for money, whilst ensuring it gives you ample cover for your needs.