What is mortgage protection ?
Mortgage protection is life insurance which is designed to pay off your full mortgage balance upon your death. The life insurance policy is assigned to your lender to pay off your outstanding mortgage upon your death.
Do I have to take out a mortgage protection policy ?
Sometimes it comes as a surprise to first time buyers but the answer is, mostly, yes. Under Section 126 of the Consumer Credit Act, 1995, your lender is required to ensure you have a mortgage protection policy in place before granting you a loan.
There are some exceptions though :
1. You are aged over 50.
2. The mortgage is for an investment property.
3. You cannot get life insurance or can only get it at a much higher premium than normal.
4. You have an existing life insurance policy that you can assign to your lender.
Ok. And do I need to get my mortgage protection policy from my lender ?
No. You are free to shop around and find the best quote. AM Financial has access to all the major insurers in the Irish market and can source you the most competitive quote.
My mortgage balance will decrease over time, how can I be sure I am not paying too much for my mortgage protection ?
You have two options with mortgage protection. Suppose you take out a €400,000 loan to be repaid over 30 years.
Option 1 : A life insurance policy paying out €400,000 upon your death in the next 30 years (level term assurance). Any excess amount over your mortgage balance is paid to your next of kin.
Option 2: Cheaper option : a life insurance policy designed to pay off the mortgage loan balance upon your death (reducing term assurance) in the next 30 years. These policies typically assume higher interest rates (6%, 8%) to ensure your loan balance is fully paid off on your death.
What do I do next ?
No matter where you are in your mortgage process, speak to AM Financial about your mortgage protection. Rest assured that AM Financial will find you a competitive quote.