Mortgage protection is an insurance policy that is used to pay your mortgage if you or another policy holder cannot pay the rest of it. This usually happens when the spouse who makes the majority of the income for the household dies. The mortgage policy can help the widow pay off the debt, for joint mortgages both holders need mortgage protection insurance. I am going to speak on mortgage protection, especially for Irish citizens.
Irish mortgage protection policies run for the length of time on the agreed mortgage. If you have a 40-year mortgage, the lifetime of your insurance will run 40 years as well. Laws in the Republic of Ireland allow lenders to force you to cover your mortgage unless certain requirements are met. There are only a few ways to get around a mortgage policy. If you are over 50 or are buying an investment property, you do not need mortgage insurance. Also, if you have life insurance already, then it will not be necessary to get this policy.
There are also many types of mortgage insurance. Firstly, there is Reducing Term Cover, which states that if you pay more money off your mortgage then the amount the policy covers reduces in line with your balance on the mortgage. Usually when you get coverage like this, the insurance ends when your mortgage is paid. This policy is the cheapest and most common version of mortgage protection, and the premiums do not change. You also have Level Term policies, which allow the amount you are insured and the premium you pay to remain level. This gives the policy holder the same amount of coverage during the term of the loan. If death happens before the mortgage is paid off, then the insurance company will pay out the original amount. The remaining balance of your insurance will go to your family.
Most mortgage insurance allows you to add serious illness to cover your policy. If you add serious illness to your insurance, then you will be covered if you die or come down with a serious illness. It is very expensive to get this added to your policy, but it may be the right thing to do. Life insurance policies can also be used if they are not already covering another loan or mortgage. If there is any money left over after the mortgage ends, then the balance will go to your dependents as tax-free income.
After deciding between mortgage protections, you must find a provider that will give you this policy. Most mortgage lenders offer insurance when you apply for a loan and going through a lender allows you to pay the insurance premium with your monthly payments. If you use a policy provided by a lender, you may be placed under the lenders group policy. Lenders group policies can restrict you from switching your mortgage. Ff you decide to go down this road, it is important to be aware of this.
You can also get insurance through a broker. Brokers will comb through policies provided at numerous lenders for the one that best fits your needs. They will also let you know if there are vast differences in the policies provided. If you use an existing life insurance policy, you will have guaranteed insurance if you are insured for the equal value of the mortgage term. To use your life insurance, you have to ask your lender to pay off your mortgage in the event you die and cannot make payments. If your life insurance benefit is used to pay off your mortgage, your family will not receive any money left over. If you want your family to have more security, it may be wise to take out a separate mortgage protection policy or increase the coverage on your existing policy. If you have a policy that is not offered by your lender, it allows you the ability to switch your mortgage easier.
If you are considering topping up your mortgage, you have to see if the policy matches the value of your mortgage. You have the choice of a new policy for the value of your new mortgage or just for the top-up amount. It is important to see the benefits of both options. It is cheaper to keep the original protection policy, while buying a second policy for the top-up amount. You should check the cancellation costs before replacing it as well. Regardless on the options you choose, the premium will be higher than the last time you took out cover. Your age affects your premium, and the only ways to combat this is by proving you live a healthy life.
For switching a mortgage, you have the option to assign it to a new lender. The premium will usually be the same as before if the loan amount and term does not change. If you are a part of your lenders group policy, the lender can cancel the policy once you switch mortgages. If you want a new policy, it will end up costing you more money; If you are old and unhealthy, the premiums can go up exponentially. If you are going to switch your mortgage, it is necessary to ask your lender if you can get mortgage protection.
If you want to pay your mortgage off early, you are offered two options. You can cancel your protection cover and pay more, or you can keep the policy and continue to pay it until its maturity. If you have a policy that covers more than just your mortgage, then you can choose to keep it. If you decide to cancel your protection, it is important to check with your insurance company. If you do not go through your insurance provider, you may be liable to make payments on your account. If the policy has been set up by your lender, the lender can cancel the policy on your behalf. This is not always the case, so it is best to reach out to see your options. If you pay using direct debit, you need to have the cancellation in writing. If you want to keep paying the policy after you finish paying your mortgage, the policy will cover you until it expires. In the event you die before the policy ends, the leftover money will be payed to your dependents.
These are your options for mortgage protection in Ireland. It is best to reach out to friends and family to find your next step in the process. This is a very big decision, it takes careful consideration before making a final verdict. There are many lenders and brokers in Ireland that offer satisfactory options for your needs.
Written by John Spurrier, Mortgage Analyst at Online Application