Home Mortgage provider insisting I insure rebuild at same value when initially drawn down

[carallen2]

Hi,
Ive been a long time reader of the forums but this is my 1st post-apologies if I have posted this in the wrong section.
I drew down my mortgage in 2006 + each year I check the updated rebuild costs of my house from the chartered surveyors of Ireland website when getting quotes for my house insurance renewal. For the past three years the mortgage providers insurance company provided the best quote so I stayed with them.
This year I got a cheaper quote from another provider so I switched: The mortgage provider has now stated I am under-insuring my house: They are using the initial rebuild value from 2006 when the mortgage was drawn down as the basis for this claim. I argued that costs have dropped and have used the Society of Chartered Surveyers guidelines but they arent taking this into consideration.
I also pointed out that each year I would have insured my house for the updated rebuild cost value but they dont appear to have updated their records to show this.
Has anyone else come up against this?
I dont want to overinsure my house.

 

[NorfBank]

You will need to get your house revalued and send the valuation to the lender. This costs around €130. If the rebuild cost on the new valuation is less than on the original valuation then you can go ahead and insure it for this amount. The lender will not have a problem with this.

At the moment they can only go on the information they have i.e the 2006 valuation.

You have to weigh up whether the savings over the next few years on the lower rebuild costs will be more than €130.

It seems unfair that the lender is only kicking up now that you are trying to move insurance but it's not surprising. You may have a case to argue if you want to take it further that they have implicitly agreed on the lower rebuild costs and should honour it. I guess it's up to you how hard you want to fight it and if the effort is worth the reward.

 

[carallen2]

Hi,
Thanks for the quick response- I was just really surprised by the letter + the info from the mortgage company when I rang to query the letter this morning !!
The renewal this year was over 100eur cheaper when i shopped around so think over the next few years it might be worth it to get the house revalued!!
Thanks again.

 

[Ravima]

Be careful. If your LTV goes up, then you might face a battle that lender wants to increase the rate!

 

[hfp]

Hi,

I also pointed out that each year I would have insured my house for the updated rebuild cost value but they dont appear to have updated their records to show this.

Just got my new home insurance docs in the post today, and there is a clause

"If the sum insured is more than £500,000, we will increase it each month in line with increases in the House Building Cost Index prepared by the Royal Institution of Chartered Surveyors or another index we choose. The sum insured will not change if the value goes down

You'll probably find that your insurance company has a policy of not reducing your cover, to ensure that should costs rise again you won't be under-insured

 

[carallen2]

Hi All, Just to provide an update on my post back in Sept- I wrote to the bank attaching the 2010 index by the Institute of Chartered Surveyors of Ireland noting how I calculated my rebuild costs and asked them to contact me to discuss this issue further as I didn't want to over or under insure the rebuild costs of the house.
I got a letter in the post this week to say they have updated their records accordingly so I didn't have to go down the route of getting a chartered surveyor to value the house.

 

[newirishman]

Be careful. If your LTV goes up, then you might face a battle that lender wants to increase the rate!

Rebuild value has not necessarily to do with LTV or mortgage valuation as it would not include land costs, "location, location, location" , and similiar.

 

[peteb]

Just got my new home insurance docs in the post today, and there is a clause

"If the sum insured is more than £500,000, we will increase it each month in line with increases in the House Building Cost Index prepared by the Royal Institution of Chartered Surveyors or another index we choose. The sum insured will not change if the value goes down

You'll probably find that your insurance company has a policy of not reducing your cover, to ensure that should costs rise again you won't be under-insured

You are getting confused here between re-instatement value and actual purchase/sale value. If the sale value of your house drops, the sum insured may still remain the same!

 

[LDFerguson]

Rebuild value has not necessarily to do with LTV or mortgage valuation as it would not include land costs, "location, location, location" , and similiar.

I think Ravima's point was that if the poster got a valuation to re-assess the rebuilding cost, the valuation also contains a market valuation of the property as a whole, which could potentially be used against them for LTV purposes.