Taeya Maj, 36, is the co-founder of No Guilt Bakes. She bought a four-bedroom, ex-council maisonette in Bethnal Green with her cousin in 2012 and her fixed-rate mortgage expired in November 2022.
She applied for a new mortgage before her old mortgage came to an end, but NatWest said the leasehold papers were incomplete, something that’s not uncommon with older leases. “I’ve been back and forth with the Housing Association, who are the freeholders, but they haven’t produced the missing pages.”
In the meantime, Taeya has gone on to the mortgage’s standard variable rate (SVR) and is paying out more than £400 extra a month. “I can’t afford this extra cost and I want to secure this new rate because it runs out in May. It’s really low compared to what else is available.”
NatWest has suggested that she look into buying indemnity insurance, which will mean she can go ahead with the mortgage without having to produce the missing leasehold documents. “I’d like to know how much indemnity insurance costs and how I go about getting it for this scenario?”
The details
- Four-bedroom maisonette bought for £280,000
- Current value: £450,000
- Old mortgage rate and repayments: 1.74 % (£1,004 a month)
- SVR and repayments: 6.49 % (£1,436 a month)
- New mortgage offer and repayments: 3.53 % (£1,140 a month)
The advice
Gary Hemming, at ABC Finance, says:
“Buying indemnity insurance is fairly common and protects you as well as the lender if the lease is indeed defective. While nobody is excited by the prospect of spending extra money on indemnity insurance, it sounds like it could actually save you money in this case.
The other point to consider is that, when the time comes to sell the property, your buyer’s solicitor could also pick up on the missing pages, which will clearly make it difficult to complete the sale.
To get indemnity insurance, you should contact your conveyancer and request a quote. They will then pull together quotes and arrange it for you if you’re happy with the deal on offer. There’s no commitment, so no harm in getting a quote.
Compare the cost of your quote to that of switching to another mortgage product. If it’s cheaper to stay put and pay for indemnity, then clearly you should proceed. If it isn’t, consider the risk of the next lender also being unhappy and the issue persisting (with you sitting on your current lender’s SVR).
One final point: it sounds like the documents have been lost since 2012 (otherwise the original mortgage wouldn’t have completed). This means that the solicitor you used for the purchase is likely to still have the full lease. If they do, liaise with them and the council to get it sent back over to the council and the problem is solved.
If they don’t have a copy, then approach the council to explain that, as a result of them losing the pages from the lease, you’re unable to re-mortgage without taking out indemnity insurance. You can’t afford not to, as your mortgage rate will become unaffordable. Clearly, this is their fault, but you are the person who is impacted so ask them to pay for the insurance as they’re putting you out of pocket.
Clair Rickaby, at SPF Private Clients, says:
The indemnity market is being increasingly called upon for solutions to issues such as Taeya’s. Property owners are often faced with “defect in title” issues, which could ordinarily be resolved by legal rectification. However, Taeya doesn’t have time for this.
Where risks are identified, a lender will generally accept an indemnity insurance as an alternative solution to speed up the process. The issue for the lender is that the missing lease clauses mean it can’t confirm that the root of title to the property is adequate for lending security.
Placement of these policies is usually undertaken by the acting solicitor, either on behalf of a seller, purchaser or borrower as agreed between the parties to the transaction. Unfortunately, there are few direct routes to market for property owners so, to progress with indemnity insurance, Taeya needs to appoint a solicitor or ask the lender’s solicitor to source the policy for her.
The solicitor would then engage with an insurance broker to secure the best available terms. Premiums based on £450,000 are likely to be around £300, which would cover the remaining term of the lease, but, as with all policies, risks are considered individually, and this could fluctuate.
