Look at you all grown up and surfing the interweb about mortgages and the like.
Doesn’t time fly.
So you’ve finally copped on and decided to buy a house.
Oh you’re screwed now, no more impulse buys, you’ll have to save every penny for a trip to IKEA to buy that shelving you have your eye on.
No more late night shenanigans, it’s a cheap bottle of wine and the Late Late for you.
Are you sure you want to buy a house?
Well if you are, you’ve come to the right place, here’s the deal on the insuranc-ey stuff you need:
The bank is giving you a load of money.
Banks aren’t stupid (Celtic Tiger era may beg to differ) so they’ll make sure they get their money back if you die.
That’s why they insist you take out a life insurance policy.
You die, the policy pays back the money you borrowed from the bank.
Basically, it covers the bank’s arse but who’s gonna buy something called the bank’s arse insurance?
All fairly clear?
Exceleent, here are the questions I get asked the most:
Mortgage protection is a type of life insurance policy but the cover reduces over time. Some people call it reducing or decreasing term insurance.
You need to yourself for the amount and term (years) as the mortgage you’re getting.
e.g Sarah and Paul are buying a house for €300,000. The mortgage is for 90% of the purchase price i.e €270,000. The mortgage will run for 25 years so they need a mortgage protection policy covering €270,000 over 30 years.
By the way, they both need cover for €270,000, it’s no good Sarah getting cover for €135,000 and Paul for €135,000. They are both “joint and severally” liable for the full amount.
If married they should buy a dual or a joint life mortgage protection policy.
If not, they should buy 2 single life policies with Sarah paying Paul’s premium and vice versa. This reduces any potential inheritance tax liability.
For a residential mortgage, the bank will insist on it before they issue your mortgage cheque.
In some cases the lender may waive the need for life insurance:
Waiving the need for life insurance is at the bank’s discretion.
However, mortgage insurance is not mandatory for an investment mortgage.
The cost of mortgage protection depends on:
Using Sarah and Paul above, and presuming they’re non-smokers in good health, here are a range of quotes for €270,000 mortgage protection over 25 years.
The older you are, the more expensive it becomes.
If you’re a smoker, you can double those quotes.
Mortgage payment protection insurance is……well, it’s a waste of money.
In theory, it’s a policy that will pay your mortgage for 12 months if you can’t work due to illness or redundancy.
In practice, it was mis-sold to people (like the self-employed) who could never make a valid claim.
It’s easy to confuse mortgage income protection and mortgage repayment protection because they sound similar.
But the benefits they provide are like chalk and cheese.
Mortgage income protection will provide with an income to pay your mortgage if you can’t work due to any illness, injury or disability.
You’ll get paid until you get back to your job or until the end date of your mortgage.
So if you get sick on day one of your 25-year policy and can’t work again, your policy will pay out for 25 years.
Mortgage income protection is the younger brother of income protection – you can read more about the different types of income protection here.
Let’s finish with an easy one but the number one question I’m asked.
Life insurance should be called family protection because when you die, it leaves an agreed lump sum to your family to replace your income.
Mortgage protection, as you now realise, should really be called bank’s arse insurance because it only protects the bank.
No matter what the bank may tell you:
It’s all BS but it’s up to you to stand up for yourself and say thanks, but no thanks. At least shop around for another quote, don’t let them bully you into buying their cover without a fight.
All I can say is our quotes will be lower, our service will be better, our turnaround will be faster and our policy will have benefits the bank simply can’t offer – like dual life mortgage protection for the same price as joint.
You’re not obliged to buy from the bank who gives you the loan. And it’s illegal for a bank to offer you a mortgage on the condition you buy insurance from them.
This should be common knowledge. It’s a sad state of affairs when we have to make this clear when it should be on the bank to explain this to you before you sign on the dotted line.
That’s the bare bones of mortgage protection.
I’m sure you have millions of other questions.
If you do, here’s a good place to start. You can download our mortgage protection guide or sign up for our free mortgage protection course where you’ll learn all you need to know about mortgage protection and the pitfalls to avoid. And all in easy bite-sized pieces served fresh over email.
If you prefer a chinwag, I’m on 05793 20836.
I look forward to your call!
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