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  • Mortgages & Finance

    Remortgage money in bank and banks go bust?

    Hi!

    I was thinking of remortgaging my house but am so worried of a  northern rock situation with brexit and all that.

    What happens if I take an off set remortgage, And the banks go bust and I have the money in the bank. Do I lose it all or does it get taken off the balance I owe the bank?

    I know there's some government protection of like 85k do they pay you back immediately or in installments?

    Thanks so much guys Smile

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    FSCS will cover you up to £85k if a bank goes bust, however they also have an allowance of "up to £1m" in the event you have a temporary large balance in the bank for situations such as selling a home and the time the funds were in the account was < 6 months. I am not sure if a remortgage would also be covered so may be worth reaching out to them - worth noting though limited companies only get the £85k protection, the £1m doesn't apply to them.

    If you're really nervous just set up lots of savings accounts and spread the cash around but make sure each bank is an entirely separate company. If for example you had £85k with First Direct and £85k with HSBC, you would lose £85k because HSBC owns First Direct.

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    Hi Rich,

    Thanks so much

    Does the protected money get returned to you quickly or is there a time frame of like 10 Years?

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    No problem!

    Apparently you get your money back within 7 days, it's an automated process.

    Also I believe if it's a joint personal account you're covered for £85k x 2 @ £170k total which I didn't mention before Smile

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    I guess you are asking - what if I have more than £85k in the bank to offset the mortgage and the FSCS only covers £85k so what about the rest?

    This question has been answered before on this forum so if you do a search you should find it.  From memory, I believe the outcome was that it falls under the rules of insolvency and would be addressed by the bank's administrators.  Therefore the funds you have should be offset against the money you owe the bank (the mortgage) so you should be ok - unless you have more in the bank than you owe on the mortgage.  Note that by spreading the funds between registered banks will not have the affect of offsetting your mortgage (saving you interest) - which was the point in the first place.

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    Hi Moneybox,

    Thanks for this, nice to know you can deduct it off the outstanding mortgage. I just get paranoid about have a lot of money in the bank haha

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    Firstly spread your cash around several banks to mitigate the risk of one failing.

    FSCS up to 85k has been mentioned, but I think if we're in the true situation where every bank has failed, there would probably be troops on the streets and the "guarantee" wouldn't be very meaningful.

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    Hi JohnA, 

    Definately will spread also the last comment shows that it can be deducted off the mortgage if it is over 85k.

    If it happened to me , it Definately would take an army to calm me down haha.



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