Reduced mortgage, unsure about insurance?

crustybla

Hi there,
I would be grateful for any advice as we are unsure what we should do.

I was laid off recently and paid a lump sum off our mortgage, 121,000 down to 20,000. Obviously we're broke but delighted. We cancelled our payment protection but we don't know what to do about our mortgage protection insurance.

The sum insured is 147,142.00 over 30 years, there's 18 years left on it now. We want to bring it right down, maybe even cancel it?

The bank, ebs, aren't being incredibly helpful though they've booked us in with a life insurance guy for next week. We don't want a sales drivel, just proper advice so I'm not very confident about how it will go.

Thanks for reading!:)

seamus

The bank get a kickback from the insurance company that they've referred you to.

Strictly speaking you are obliged to have mortgage protection insurance. If you cancel it, the bank can in theory consider it a breach of the terms of the mortgage and call the whole thing in.

I have never once heard of a bank doing that though.

Am I getting it right that the balance of your mortgage now stands at €20k? And you have 18 years to pay that off?

You can go fishing around for quotes from other places. However, the main issue is that they will all have a minimum premium in place, and you'll have to pay it. I did a quick online quote for €20k and it came to a tenner a month! Which is actually a ridiculously high price to insure that amount.

I would be inclined to cancel the mortgage protection insurance. If you're servicing your loan, the bank are not going to go to the hassle of calling it in when you've only got €20k to go.

But also have a look at your figures. If you're still repaying that over 18 years, it's nice to have the tiny mortgage payment going out, but ultimately it's still hanging over your head and you'll have repaid €30k+ by the end.

If you can afford to maintain your current level of repayments, then keep doing that; overpay the mortgage and you'll have it cleared in 3 to 4 years.

crustybla

Yes Seamus you're right, we only paid this week so at the moment it's over 18 years. That's only until we get our heads sorted though, we aim to reduce the term though we won't be able to afford our previous amount. It's 80 a month for the mortgage protection. I reckon you're right, we should think of cancelling and paying extra off each month.
I really appreciate your advice, thank you!

Trish56

€80 a month sounds expensive for Mortgage Protection cover. Does it include serious illness cover or were/are you smokers?? Did you have any health issues when you took it out?

You can cancel existing cover and take out a new policy for 20k over 18 years and it should be around minimum premium €10 unless you are smokers or have any health problems.

crustybla wrote: »

Yes Seamus you're right, we only paid this week so at the moment it's over 18 years. That's only until we get our heads sorted though, we aim to reduce the term though we won't be able to afford our previous amount. It's 80 a month for the mortgage protection. I reckon you're right, we should think of cancelling and paying extra off each month.
I really appreciate your advice, thank you!

micar

I work for a life assurance company

You have three options

1) leave the life policy as is. If anything did happen, the balance of the mortgage would-be paid. The balance would go to the estate of the deceased.

2) bring cover down to outstanding mortgage balance. This would reduce the premium. you could also reduce the term time match the timeframe when you expect the mortgage to be paid.

3) bring the cover down based on a level of premium you're willing to pay.


Any reduction to term and benefit would require a letter from the bank to the company providing the protection policy.

Trish56

Interesting ....Can you amend cover and term on an existing Mortgage Protection Policy?? Maybe more recent policies but not policies that were taken out many years ago and perhaps it would depend on the life company. I tried to change a policy from smoker to non smoker and had to take out a new policy.

micar wrote: »

I work for a life assurance company

You have three options

1) leave the life policy as is. If anything did happen, the balance of the mortgage would-be paid. The balance would go to the estate of the deceased.

2) bring cover down to outstanding mortgage balance. This would reduce the premium. you could also reduce the term time match the timeframe when you expect the mortgage to be paid.

3) bring the cover down based on a level of premium you're willing to pay.


Any reduction to term and benefit would require a letter from the bank to the company providing the protection policy.

micar

Trish56 wrote: »

Interesting ....Can you amend cover and term on an existing Mortgage Protection Policy?? Maybe more recent policies but not policies that were taken out many years ago and perhaps it would depend on the life company. I tried to change a policy from smoker to non smoker and had to take out a new policy.

Yes - only exception is increasing the term. But that's a separate reassurance issue with us.

Any policy with us, you can change the benefit amount and reduce the term.

However, you cannot change the smoking status.

coylemj

micar wrote: »

Any reduction to term and benefit would require a letter from the bank to the company providing the protection policy.

You don't need the lender's permission to do that - what if you simply cancel the policy stop paying the premiums and move to another life company with a different level of cover and term?

I did this twice over the life of my mortgage, I shopped around online for a better rate and when I moved the policy, I instructed the new insurance company to note the interest of my bank on the policy. I also gave them the mortgage a/c number so I assume they wrote to my bank and informed them of the change, the bank in turn must not have seen any problem with this as they never came back to me and queried what was going on.

The reason I switched for the first time was that I gave up smoking but the original MPP policy premium was based on the fact that I smoked and just like your company, they wouldn't change the premium so I moved. When I saw how easy it was to move, I did it again a few years later.

If the OP wants to switch to a policy with a smaller benefit i.e. one which covers the reduced balance then he is free to do so.

You are of course correct in your earlier post in saying that keeping the higher cover is an option as the insurance will pay out that amount in the event of death so there will be more cash left over after the mortgage is paid off.

PaulM1977

Irish Life are a tied agent of EBS so they will only be able to offer you their mortgage protection policies. Not a huge amount in the difference for the level of cover you need but every cent counts. You can get it for €10.00 a month elsewhere so shop around for this cover or try a broker who can arrange this for you.

micar

coylemj wrote: »

You don't need the lender's permission to do that - what if you simply cancel the policy stop paying the premiums and move to another life company with a different level of cover and term?

I did this twice over the life of my mortgage, I shopped around online for a better rate and when I moved the policy, I instructed the new insurance company to note the interest of my bank on the policy. I also gave them the mortgage a/c number so I assume they wrote to my bank and informed them of the change, the bank in turn must not have seen any problem with this as they never came back to me and queried what was going on.

The reason I switched for the first time was that I gave up smoking but the original MPP policy premium was based on the fact that I smoked and just like your company, they wouldn't change the premium so I moved. When I saw how easy it was to move, I did it again a few years later.

If the OP wants to switch to a policy with a smaller benefit i.e. one which covers the reduced balance then he is free to do so.

You are of course correct in your earlier post in saying that keeping the higher cover is an option as the insurance will pay out that amount in the event of death so there will be more cash left over after the mortgage is paid off.

If the policy is assigned, we would not take the clients instructions to cancel. We would require a letter of agreement or a letter of no further interest from the back.

You are correct. You can simply cancel the DDM yourself and the policy will lapse.

That's not a good idea if you don't have alternative cover in place.

If the policy is assigned then the bank really own the policy and permission from them would be required to reduce the term or benefit.

With regard to your own policy, does your mortgage provider know who your life cover is with.

The mortgage provider would want an interest in the new policy by way of deed or notice of assignment. This is something you would need to sign. They then would normally send notice of assignment to the life assurance company.

Tbh I'd get that checked out.

seamus

coylemj wrote: »

You are of course correct in your earlier post in saying that keeping the higher cover is an option as the insurance will pay out that amount in the event of death so there will be more cash left over after the mortgage is paid off.

I was under the impression that a standard mortgage protection policy (the one most people get with a mortgage) will only pay the mortgage balance even if you're overinsured (like a motor policy). Whereas you need a proper life assurance policy to have both the mortgage covered and a cash sum for the balance. Maybe I'm mistaken?

crustybla

Guys thank you so much for all the info! The printout the bank gave us says our cover is for 147,000 with 18 years left on it. We're both non-smokers, always have been, no health issues so far touch wood. Seamus, I thought we had a life insurance policy until we go the printout. It says on the top of the page; Life Insurance Policy Details blah blah blah. Then it says Type of Policy - Mortgage protection. First and second life, no serious illness cover.

Now, I apologise but I got things a bit wrong. Well, more than a bit I think. Its says Monthly premium is 19.02.
I reckon now that they are taking into account our payment protection insurance (roughly 20 per month), which we actually cancelled last week, and our home insurance which we pay monthly.

Sorry about that guys, I don't know what way I'm thinking!

PaulM1977

€19 for cover of €147k when your mortgage is only €20k is not too bad. It gives you cover of an additional €127k, obviously reducing each year. You might look at taking out a level term policy for a lesser amount than the €147k that will cover the mortgage amount outstanding but also have a lump sum paid if the worst was to happen to either you or your partner. This would be based around your current age, whether you are smokers or not(assuming you're not) and your health status at present. €100k over 18 years on a dual life basis would be around €17.00, depending on a persons age and being non-smokers.

PaulM1977

One other thing, was the payment protection that you were paying, there to cover you in the event you lost your job? Because if so, you may be able to have your mortgage paid under this policy for at least 12 months.

If anyone can correct/confirm this....?

ted1

crustybla wrote: »

Hi there,
I would be grateful for any advice as we are unsure what we should do.

I was laid off recently and paid a lump sum off our mortgage, 121,000 down to 20,000. Obviously we're broke but delighted. We cancelled our payment protection but we don't know what to do about our mortgage protection insurance.

The sum insured is 147,142.00 over 30 years, there's 18 years left on it now. We want to bring it right down, maybe even cancel it?

The bank, ebs, aren't being incredibly helpful though they've booked us in with a life insurance guy for next week. We don't want a sales drivel, just proper advice so I'm not very confident about how it will go.

Thanks for reading!:)

Did the payment protection pay out? Did paying off the lump sum with your redundancy not reduce the payments you got from your expensive policy.

House insurance is only about 330 for the year, what would you do if your house burnt down ?

Talk to Irish life or friends first about convertible dual life cover , the banks tend to be more expensive

crustybla

Hi guys, our payment protection would pay half of our mortgage for a year but wouldn't start paying for 3 months. Rightly or wrongly we opted to bang some dosh off the mortgage and be done with it. Our home insurance was 385 for the year, I'm guessing next year we'll be switching! The figures didn't change from our policy after paying the lump sum off. We have an appointment tomorrow with an insurance guy at the bank but I'm not expecting much from it.

ted1

crustybla wrote: »

Hi guys, our payment protection would pay half of our mortgage for a year but wouldn't start paying for 3 months. Rightly or wrongly we opted to bang some dosh off the mortgage and be done with it. Our home insurance was 385 for the year, I'm guessing next year we'll be switching! The figures didn't change from our policy after paying the lump sum off. We have an appointment tomorrow with an insurance guy at the bank but I'm not expecting much from it.

How much mortgage protection were you paying ? What kind of advice did you get when you took it out ? It's a real scam and you may have been mid sold it.

As a guide, myself and my misses are paying 330 a year for dual life cover. If one if use dies they pay out the original value if the house which was 220,000.
Then the policy reduce continues if the other spouse dies they pay out 220,000 again.

After the mortgage is paid it switches to a life insurance policy and us fixed at 330 , meaning that they don't reassess use.


Also with friends first I got arebsyecif the first 10 months after year 1

Trish56

Just because you reduced the balance outstanding on your mortgage this would not affect the cover or premium you have on your home insurance policy. This cover is based on the value of your property not the mortgage o/s. You can always shop around for home insurance. Aviva offers good value online.

You are entitled to make a claim on your mortgage payment protection policy once you were made redundant but would not be covered if you took voluntary redundancy.

crustybla wrote: »

Hi guys, our payment protection would pay half of our mortgage for a year but wouldn't start paying for 3 months. Rightly or wrongly we opted to bang some dosh off the mortgage and be done with it. Our home insurance was 385 for the year, I'm guessing next year we'll be switching! The figures didn't change from our policy after paying the lump sum off. We have an appointment tomorrow with an insurance guy at the bank but I'm not expecting much from it.

crustybla

Hi guys, sorry, haven't been on in a while. I know reducing our mortgage has no effect on house insurance Trish, I just meant we'd ring around next year, we usually do it through the bank. The redundancy wasn't voluntary. We met up with the insurance guy and as expected we didn't gain much from it. Our current deal does seem ok for the moment. It's a minefield isn't it. I'm grateful for you input guys, thank you.

Gael23

Have you done this already? If not i would think twice. Someone I know did the same thing during the recession of the 1980s but was unemployed for years resulting in serious financial difficulties, he owned his home but had no money to live off.