Mortgage Protection expendable?

Fol20

Hey Guys i was wondering is mortgage protection policy expendable specifically a level or convertable policy that may not cover the entire mortgage?

What do people recommend going for as well is a level or standard protection policy better? I have interest only mortgage for a few years so i think a level might be better however im not too sure.

Found the extract from revenue below but not sure if its covered

"
This treatment only applies to mortgage protection policy premiums. Such a policy is
aimed at covering the full amount left outstanding on a person’s mortgage should
they die. It is often called decreasing term insurance, as the amount that needs to
be covered reduces every time a payment is made, with the result that premiums
are lower than those for straight insurance. This type of policy should not be
confused with other products often offered by life assurance companies such as
mortgage payment protection policies, keyman insurance or endowment policies.
These are a form of short/straight term insurance which pay out if an individual
becomes unemployed or ill and are not normally linked to a person’s life. Revenue
does not allow this later type of policy premium as a rental income deduction
"

Fol20

Anyone?

Alkers

What are your own circumstances? Do you have family? Is the mortgage only in your name? These policies are required by the bank, primarily in their own interests. If you don't have a policy and you die, the bank will come after the house which could impact on any family you have.

mbarosin

If you have an interest only mortgage that means the mortgage outstanding isn't reducing. Therefore a mortgage protection policy isn't suitable for you as the life cover reduces and won't be sufficient to pay off the mortgage.
You would be better getting a level term policy until you begin to make capital repayments. Then you can switch to a mortgage protection policy

murphaph

mbarosin wrote: »

If you have an interest only mortgage that means the mortgage outstanding isn't reducing. Therefore a mortgage protection policy isn't suitable for you as the life cover reduces and won't be sufficient to pay off the mortgage.
You would be better getting a level term policy until you begin to make capital repayments. Then you can switch to a mortgage protection policy

I suppose it also depends on what savings are being made during the interest only period.

I have a mortgage on our home in Germany with a typical enough German building society "forward loan".

This entails borrowing the money interest only at 0.85% for 8 years but you are compelled to save y amount monthly with them during this period (at a poor enough 0.25% interest) and once an agreed percentage (in our case 34%) of the total sum is saved, they release a second loan (this time a standard annuity mortgage with capital and interest repayments with guaranteed 2.25% fixed for 8 years) to clear the interest only loan (along with the savings). We have a standard (term, reducing) mortgage protection policy in place.

These products aren't available in Ireland but the idea should be the same...if you have an interest only mortgage then there should be some savings or investment strategy running parallel to it to reduce the capital when the interest only period expires. Otherwise you are just kicking the can down the road and interest rates can be wildly different then.

If you have a proper parallel savings strategy then a standard reducing term life policy should be fine, but only if you are financially disciplined enough to make sure you're saving towards the capital repayment lump sum.

If the OP is waiting for some other source (eg inheritance) to clear the mortgage eventually and is not saving towards the day the interest only period expires then yes, a standard mortgage protection policy is going to leave a shortfall, bigger as time goes by.