Buying a home, whether it is your first or fifth time, is always an exciting experience. The thought of how you can transform the house and make it into a home, along with all the memories you’ll make, means it’s easy to get carried away. Who can blame you? It’s an event worth celebrating after all! Unfortunately, there is always the risk that your house purchase will fall through.
This can not only be hugely upsetting, but also financially draining. This is why many buyers opt for Home Buyers Protection Insurance. This form of insurance can prove invaluable as it helps cover some of the expenses associated with buying a house.
In this blog, we’ll explain why you may need it, how much it may cost, and what benefits it may provide.
What is Home Buyers Protection Insurance?
Home Buyers Protection Insurance is a form of insurance policy that helps protect buyers in the event their property purchase falls through. Before a property purchase is completed, the buyer pays for a host of things. Searches, legal fees, mortgage arrangement costs, and more are all due before any keys are handed over. Should the sale collapse, a buyer can suddenly find themselves thousands of pounds worse off.
A Home Buyers Protection Insurance policy is in place to help stop that from happening. It shouldn’t be confused with home insurance and does not cover every cost in the house buying process.
What does Home Buyers Protection Insurance cover?
Home Buyers Protection Insurance covers many of the things you pay for during the purchasing process. However, not quite everything is included. You’ll be able to claim back the expenses incurred by:
- Mortgage valuation fees, advice and arrangement.
- Conveyancing fees and surveys
- Storage or alternative accommodation if your current property was sold before the new purchase fell through.
These expenses can be claimed back when any of the following happen:
- The seller takes the house off the market.
- You are gazumped (where the seller accepts a higher offer from someone else despite accepting yours)
- The buyer is not legally allowed to sell the property.
- Searches indicate that the home is subject to a CPO (Compulsory Purchase Order)
- The mortgage valuation is less than 90% of the accepted offer.
- The mortgage lender requests that work be done to the property that exceeds 10% of the accepted offer.
- The buyer is made redundant or relocated.
This list is not exhaustive, and some insurers may offer cover for additional issues that may arise.
What doesn’t Home Buyers Protection Insurance Cover?
Home Buyers Protection Insurance does not cover you for any costs incurred before your policy started. Neither will it protect you if the purchase is seen as significantly risky. Should you pull out of the sale, you’ll also not be able to claim any expenses you’ve already incurred.
Further limitations also apply, including that the property must be in England, Wales or Northern Ireland, it must be a permanent building, and a solicitor or licensed conveyancer must conduct the conveyancing. Additionally, the purchase of the property must not be subject to sealed bids or a contract race.
Who is Home Buyers Protection Insurance for?
Home Buyers Protection Insurance is for all house buyers. For first-time buyers, it’s perhaps more important as the entire process is new to them. However, it’s generally a good idea for any buyer to secure a policy before proceeding with a property purchase. The cover normally lasts for around six months from the policy start date and must be renewed if the buying process takes any longer.
Do you need Home Buyers Protection Insurance?
It isn’t a legal requirement, and it’s certainly possible to buy a home without it. However, the amount you spend in the run-up to completion can be huge, and if there is a risk that you could lose that money, the insurance acts as a good safety net.
When should you buy Home Buyers Protection Insurance?
You should buy a Home Buyers Protection Insurance policy once your offer has been accepted in writing and within 14 days of instructing your conveyancer or submitting a mortgage application. With the average time to buy a home around 15-20 weeks, according to Zoopla, and an insurance policy valid for approximately 6 months, you should remain covered for the entire process. However, delays are not uncommon, so it is worth keeping an eye on the validity of your policy so that you always remain covered.
How much will Home Buyers Protection Insurance cost?
The cost of a Home Buyers Protection Insurance policy will vary depending on how comprehensive you want the coverage to be. The popular HomeOwners Alliance offers three levels of coverage, with prices for the basic policy starting at £74 and their premium cover coming in at £199. Other policies are available through other insurers and can cost less or more than the prices seen here.
Can you claim back everything you’ve spent with Home Buyers Protection Insurance?
Sometimes it’s possible. All policies vary, with some offering a smaller degree of compensation than others. For example, using the HOA policies as a guide, you can claim up to £500 on survey and mortgage valuation fees with their basic coverage, but £1,000 with their premium cover.
Put simply, the more expensive your policy, the more you’ll be able to claim. It is also worth noting that in the majority of cases, you will have no excess to pay.
What happens to Home Buyers Protection Insurance if you choose to buy a different house?
If you have taken out a policy and then decide not to proceed with buying the home, you’ll not only lose the money you have already spent on the purchase, but you’ll also have to get a new insurance policy. This is because the policy is only attached to the property you were initially purchasing.
Is there really a risk of a house purchase falling through?
Unfortunately, there is! Varying reports have shown that as many as 30% of all house sales fall through before completion. This number alone is enough to sound alarm bells and justify the need for a Home Buyers Protection Insurance policy. Why do these sales fall through though?
Reasons for house sales falling through vary, but can include:
- The seller pulled out.
- Your mortgage offer expires.
- The chain breaks elsewhere.
- The lender values the home at less than the amount offered.
- You are gazumped.
- Issues with the survey.
- You need to pull out of the purchase.
If you are considering a house in Epsom and the surrounding areas, contact our team at Cairds. We have a stunning collection of houses for sale in Epsom, Ashtead, Leatherhead and other areas within Kent and Surrey. With independent mortgage advice and conveyancing services also available, we work with you to ensure your purchase happens as smoothly as possible.