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What Life Insurance do you Need for a Self Build Mortgage?

 

insurance for a self-build mortgage

Do you need full mortgage protection for a self-build mortgage?

Tackling a self-build, eh, you’re brave…and patient…and have deep pockets, but it will be worth it in the end.

I only wish I was as brave; instead, I’m stuck with a tiny kitchen and an enormous bathroom!

Them’s the breaks of not designing your own gaff, I guess.

Ah well, we’re lucky to have a house. I feel for those trying to buy in Ireland. What a sh1tshow it is.

But I digress.

Here are some FAQs on self-build mortgages that you might be asking too.

We are doing a self build so when applying for mortgage protection as we don’t know yet what the final figure we will draw down for our mortgage what do we enter for cover amount? For example, we have applied for a mortgage of 280k but say we only draw down 260k, in the end, can our cover be amended then and our premium decreased to reflect this or do we have to just go with the full amount of 280k we applied for the mortgage?

You’ll need to cover the amount and term on your loan offer, so if this states €280k over 35 years, you need mortgage protection cover of €280k over 35 years. If eventually, you only draw down €260k of the mortgage, you can, with the bank’s permission, reduce the amount of cover to €260k.

Reducing the cover should reduce your premium.

However, if you pass a birthday, this may negate any savings.

The premium for a 40-year-old applying for €280k cover will be the same as a 41-year-old re-applying for €260k cover if you get me.

It’s why we don’t send birthday cards 

lion.ie crap birthday card

Do you apply for cover in advance of the first stage payment?

Also, if we apply for the mortgage protection now, but if for example we don’t take our first drawdown for a few months – at what point do we start paying the mortgage protection policy payments? Would they need to start now, or could we apply now and not start to pay them until the first drawdown?

You won’t pay a penny until you tell the insurer to start your policy (and even then, some insurers will offer you a month’s free cover!). You can apply now, have your application underwritten and hold it for the start date. It’ll be one less thing to worry about.

For more detail, take a look at this blog we wrote on when to start your mortgage protection policy.

Can you move your policy when the fixed-rate ends?

We are going with a 2 yr fixed rate self-build mortgage initially. It’s possible that we would then move our mortgage to another bank, depending on interest rates at that time. Can you confirm, would it be possible to keep the same mortgage protection policy , and take it with us to the new bank? Or what’s the process?

If you take a policy out through a broker, you can transfer that policy to a new lender in the future, assuming the cover and term on the new mortgage is the same as the existing mortgage. Be careful if you are considering taking out a policy through your lender. Beware of buying a BLOCK policy. The policy dies with the mortgage. If you switch banks in the future, you can’t take your existing policy with you, so you have to will reapply.

I have heard some very sad stories of people being stuck with their bank because they couldn’t get new cover due to a health issue that happened since they initially took out the mortgage. They ended up paying through the nose for their mortgage even though other lenders had more competitive interest rates.

We’re not married. What type of self-build mortgage protection policy do we need?

Myself and my partner both need mortgage protection cover. We have a self build mortgage. I’m not sure if it is best to have us both on the one policy?

As a rule, we recommend two single “life of another” policies for cohabiting or unmarried couples getting a mortgage together. This will reduce but not eliminate any potential inheritance tax should one of you pass within the first three years of getting the mortgage. Your mortgage protection policy will clear the mortgage, but Revenue will levy tax on half a house that you will inherit.

Ridiculously unfair, I know butsurelookit, it’s tax; who said it was supposed to be fair?

If you’re not married and are getting a joint mortgage, I recommend you head over here and read this blog on mortgage protection for unmarried couples.

Alternatively, you could always, ya know, get hitched:

tax avoidance ceremony

How much does self-build mortgage protection cost?

You’ll pay the same premium for a self-build as someone buying off plans or buying a second-hand house.

When it comes to mortgage protection, the type of mortgage is irrelevant, the insurers are only interested in assessing the risk of you making a claim, so they will base your premium on

  1. your age
  2. health
  3. smoker status
  4. amount of cover required
  5. term/year on the mortgage

Click here for an instant mortgage protection quote. We don’t ask for contact details, so we won’t hound you – if you’re interested, you contact us, and we can get the ball rolling.

Who wants to be dealing with cold callers these days? 🤢

What other types of cover should I consider when self-building?

We STRONGLY recommend income protection that will give you a replacement income to pay the mortgage if you can’t work long term due to ANY illness or accident.

Serious illness cover is also available if you’re worried about the big C.

Finally, if you are going to fill all those rooms with teeny tiny feet, you’ll want to look at life insurance. Here’s a good place to start

Everything New Parents Need to Know About Protecting Their Little Ones

Over to you

If you haven’t a clue where to start and would like some bespoke (fancy wha!) advice, please complete this questionnaire, and I’ll be back with a recommendation based on your circumstances.

Right, that’s enough auld guff from me.

I’ll leave it there. If you have any questions on self-build mortgage protection that I haven’t answered, feel free to give me a shout on 05793 20836 or schedule a callback here.

Talk soon!

Nick

Mortgage Protection Insurance
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A big, and lengthy, pain in the ass.

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