From: "Stephen Burke" 
Newsgroups: uk.finance
Subject: Re: Mortgage & House insurance
Date: Wed, 21 Jan 2004 15:44:58 -0000

"Ronald Raygun"  wrote in message
news:aXuPb.5692$_y6.68034701@news-text.cableinet.net...
> There are still places, though, where the rebuilding cost exceeds
> market value,

And how is the mortgage going to be less than the difference between the
market value and the rebuild cost in that case?

 and it's also necessary to bear in mind that in the
> case of flats you can't sell the land (since the owners of the
> other flats co-own it).

It also doesn't make much sense to insure only one flat for the rebuilding
cost! Presumably in that case lenders do insist that the whole block is
insured in some way? Indeed, there are presumably covenants between the
occupiers regardless of loans.

> Also, the lender doesn't really want to get involved in selling
> the property except as a last resort.

That's related to the ability of the borrower to pay the interest, it has
nothing to do with insurance. If the borrower does keep making the payments
the lender is not going to care if the house is rebuilt or not!

>  Their aim is to make money
> while having an easy life of it, and insisting on insurance is a
> reasonable way of ensuring that aim is achieved, no matter how
> small the loan is.

The same argument is made for life insurance, but I have a mortgage without
it.

--
Stephen Burke