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View Full Version : Property Advice wanted about on bank insurance policies for mortgages in Tenerife



Dutts
02-02-2013, 20:01
Hello Folks, hope someone can advise, we have an apartment with a mortgage from a Spanish bank and have been told we MUST take out a mortgage insurance policy from the same bank. I wouldn't mind too much if we needed the policy, but we don't and the premiums seem really expensive. When we haved raised this with the bank they have been less than helpful and "suggest" that we have no choice.
Is this really what has to happen? If it isn't any advice on how to take out a suitable but more competitive policy would be much appreciated, thank you.

lifeinthesun27
02-02-2013, 20:53
We were told the same ! When I questioned it with our lawyer, he said that we need to take the insurance for the first year and when it's due to renew use someone else! He did also suggest that if the insurance is from the same bank as the mortgage there could possibly be less complications in the event of a death and the insurance has to pay out ! If you do insure elsewhere you need ideally to make sure there is a will in place with a link, note etc making sure there is an instruction to pay the mortgage debt ! This is where it can get a little more complex, which is why we just took the insurance, yes also when we we didn't need it, but with the view we have more time to do our homework before it's due next time ! Hope that helps!

CIM
02-02-2013, 20:53
What was the advice given by your estate agent or mortgage broker?

casabonny
02-02-2013, 21:30
What do the terms and conditions of your mortgage state?if you have to have it with the bank it is usually stated in the escritura de hipoteca. Some will specify only that you must have insurance with the bank named on the policy and others make it a term of the mortgage agreement and add it into the escritura. Sometimes a reduction in interest rate has been applied for taking certain items such as credit cards insurance etc withe the bank but you really need to know what your escritura states .

timmylish
03-02-2013, 01:56
Generally the banks have you over a barrel on mortgages and relative insurances. Mrs.T. went thru' all of the angles when taking her mortgage a couple of years ago and when our own Insurance Agent did a full investigation on the matter he ascertained that it was compulsory, one way or another but as has already been suggested they can only hold you to the first year (unless of course they really stitch you up and include further terms!) so the solution is to canx. and take out insurance elsewhere or, as in your case, just do without. Now here is the danger area. To have the bank accept your canx. you MUST follow the instructions contained in the policy insofar as your right to canx. I think in the policies I am talking about she had to give 10 months notice. Now you will see the naughtiness here so be VERY careful if you do decide to canx. It must be done exactly on the prescribed time frame. Santander seem to have the lead in this crafty practice but other banks have now followed their lead! I think that the life policy quote was somewhere in the order of 850 euro and thru' her broker with Liberty it was 240 euro. Bit of a difference.
You,d be amazed at the number of Spanish families we know who have never contested this practice when we,ve explained it to them. Most of them have just said "If the bank says so it must be true"!

TIS
03-02-2013, 02:44
We were told the same ! When I questioned it with our lawyer, he said that we need to take the insurance for the first year and when it's due to renew use someone else! He did also suggest that if the insurance is from the same bank as the mortgage there could possibly be less complications in the event of a death and the insurance has to pay out ! If you do insure elsewhere you need ideally to make sure there is a will in place with a link, note etc making sure there is an instruction to pay the mortgage debt ! This is where it can get a little more complex, which is why we just took the insurance, yes also when we we didn't need it, but with the view we have more time to do our homework before it's due next time ! Hope that helps!

Unless the bank has a clause in the mortgage contract to say that they are giving you a mortgage with a special rate on the basis that you also have one or more other products with them e.g. credit card, home and life insurance etc. there is no legal requirement for you to have the insurance policy with them. Also, there is no problem in the event of death, so long as the bank is named as beneficiary on the policy(ies) that you have, however, understand why these policies are required.

1. In the event that the house falls down, is knocked down or burnt down, the bank wants to ensure the mortgage is paid and you dont simply walk away from the debt - hence they want a house buildings policy in place with them named as beneficiaries. They would only be paid the cost to reconstruct the property and this is not the same as the purchase price. Often banks dupe clients into insuring the property for the purchase price, thereby making the premiums ridiculously high.

2. In the event that the person paying the mortgage dies the bank again wants the mortgage paying off in full - hence they want a life insurance with them again named as beneficiaries. With this type of policy beware of the really bad tricks the banks are still employing. Firstly, the likes of the Sol bank are selling 10 year life policies. These are not yet illegal, but frowned upon by the DGS ( Spanish version of UK FSA) and should only be for a year at a time. Secondly, the banks often have it stipulated that your policy only pays HALF of the outstanding value of the mortgage off, so your surviving partner still ends up with a mortgage which is not what most people envise would happen on the death of either one of them.

Also, remember that insurance policies in Spain AUTOMATICALLY renew at the end of the stated period of cover, unless you give the company or your agent 2 month's written notice to cancel - google " ley 50/1980 " subsection 22. This rule applies even though you are unlikely to know how much the renewal premium is 2 month's beforehand.

Naturally, if you would like a quote for house and/or Life insurance or any other type of insurance we are happy to provide you with quotes and full details of the policies so you can see how poorly the banks service their customers AND how much extra they charge.

universal
03-02-2013, 12:29
As previously mentioned Santander seem to have the lead in sharp practice, when my wife went to take out a mortgage with them, the then manager (Don Fransisco) insisted not only on a life assurance policy being taken out but also wanted five years premiums paid up front!
This amounted to over €19.000!!! That's the premiums - not the mortgage.
He also insisted that the (very one sided) obligatory interest protection policy be taken out.

Fortunately she ignored him on both counts and the mortgage was granted anyway.
We did however have property insurance through Santander but after three years we had a small claim so they refused to renew the policy!!!!!