Monday, April 14, 2008

Step 15 : Insurance

Before your bank or building society will issue your cheque you will need to get two forms of insurance sorted out.

The first is life insurance,and the second is home insurance.

For the life assurance you have two main options: term insurance or life insurance. Term insurance gives you more cover, but costs slightly more. What it is is insurance of a fixed amount for a fixed length of time (usually the term length of your mortgage). If (God forbid!) you should die before the length of the mortgage the entire amount covered is paid out. So, for example if you have a 500k mortgage and take out term insurance, but over the years you'd paid back 90% and then die, whoever you leave your estate to will get 90% back as the full 500k will be paid out (so 10% to pay rest of mortgage, and 450k left over). Term insurance costs a little more, but as you can see it pays a lot more later on too.

Home insurance is very important, as your mortgage provider will not issue your cheque without it.

One VERY IMPORTANT bit of advice is to get the home insurance to be started a few days before you close the sale. We were caught with that. Our close date was a Friday and we got our insurance to start on the Friday. But on the Tuesday when our solicitor asked the bank to issue the cheque they said no, as we didn't have insurance in place. So, we had to get it moved forward to start a couple of days earlier. Not a big deal, but it was a major stress at a time when we were highly strung already.

Friday, April 4, 2008

Step 14: Contract deposit

This happens at the same time as step 13, but I thought I'd make another step of it to make sure you notice it.

When you sign your contracts you will also need to pay the rest of your deposit. This is standard at 10%, but it is usually possible to negotiate it down - for example if you get a 92 or 95% mortgage you may only want to pay 5 or 8% as the deposit and have the rest come directly from your mortgage. Once you have a valid reason your solicitor should be able to agree this with the vendors solicitor.

As this is generally delivered as a bank draft (not a cheque), it is a good idea to arrange the bank draft before you sign (a day or two should be enough time, but you should confirm this with your bank as they differ).

Step 13: Contracts

The next step is the first legally binding one: Contracts.

The vendors (people selling) will draw up contracts of sale with their solicitor. This is a long document - about 30 pages roughly - which has a hell of a lot of legal mumbo-jumbo which all comes down to "We give you cash, you give us house".

What they send is a draft contract, and they send that directly to your solicitor. Your solicitor will usually send you some notes on it and maybe some questions. For example, ours asked us to check the land registry documents referred to the right land with the engineer who did our survey.

Normal procedure is that you will go into your solicitors office and sign both the loan offer (see step 12) and your sale contracts at the same time in their presence. They send these back to the vendor with a bank draft for your outstanding deposit (Step 14). Usually at this point your solicitor will confirm the charge for their service - the start of your money disappearing!