Mortgage Payment Protection - Should I cancel it? Is it necessary?

dermatrov

Hi.

Looking for some advice here. I am paying €115 each month to AIB for mortgage payment protection. I am finding it hard to meet this and have been advised by a friend who is a broker that it is not necessary as the state would pay the interest on my mortgage for 1 year if I was unlucky enough to loose my job (The same period as the policy covers)

I have also seen on some threads that some people fin it hard to get payments from their policies.

Is this policy really necessary? Is it worth the money?

Any ideas or suggestions would be appreciated.

Thanks

Dermatrov

seamus

You will get assistance on your mortgage from the state, but whether it will cover your interest repayments is another thing altogether.

From what I've heard, yes it all seems to be a bit of a swizz. Initially, apparently, it's great because everything is looked after, but it's after that it becomes a bit of a burden.
When you get a new job, you will have to continue paying your mortgage protection premium, but there will be an exclusion period where, if you lose your job again or fall ill, the insurance company won't pay your mortgage for you, but you will have to continue paying the premium anyway.

I have also heard other horror stories/shady practices, such as:

- You may be expected to pay part of your social welfare benefit against the mortgage repayment
- The insurance company only cover interest payment, not principle payment, leaving you short in your repayments
- The company will only pay out on mortgages up to a certain interest rate, after that you have to cover the rest of the interest.

It's all about reading the documentation on the proposal document. Personally I wouldn't pay it unless the company guaranteed to cover the entirety of the mortgage repayments, no questions asked, for at least 2 years. And even then I would only pay it if I was concerned that I would be jobless or ill for an extended (but temporary) period of time.

Andymfinancial

It is not a requirement of the mortgage to have it so you can cancel it if you wish. Have you thought of going to a broker and maybe covering half of your mortgage payments. Also the previous comments in relation to only covering mortgage interest is not always true, some cover the full payment. It should also be noted that if you ever do claim for redundancy the bank with contact you on a regular basis to get you back work and require regular proof that you are still looking

dermatrov

Andymfinancial wrote: »

It is not a requirement of the mortgage to have it so you can cancel it if you wish. Have you thought of going to a broker and maybe covering half of your mortgage payments. Also the previous comments in relation to only covering mortgage interest is not always true, some cover the full payment. It should also be noted that if you ever do claim for redundancy the bank with contact you on a regular basis to get you back work and require regular proof that you are still looking

Thanks Andy. No I had not considered looking at a different policy, didnt realise that I could do that, I thought it was all or nothing. Would it be much cheaper?

dermatrov

seamus wrote: »

You will get assistance on your mortgage from the state, but whether it will cover your interest repayments is another thing altogether.

From what I've heard, yes it all seems to be a bit of a swizz. Initially, apparently, it's great because everything is looked after, but it's after that it becomes a bit of a burden.
When you get a new job, you will have to continue paying your mortgage protection premium, but there will be an exclusion period where, if you lose your job again or fall ill, the insurance company won't pay your mortgage for you, but you will have to continue paying the premium anyway.

I have also heard other horror stories/shady practices, such as:

- You may be expected to pay part of your social welfare benefit against the mortgage repayment
- The insurance company only cover interest payment, not principle payment, leaving you short in your repayments
- The company will only pay out on mortgages up to a certain interest rate, after that you have to cover the rest of the interest.

It's all about reading the documentation on the proposal document. Personally I wouldn't pay it unless the company guaranteed to cover the entirety of the mortgage repayments, no questions asked, for at least 2 years. And even then I would only pay it if I was concerned that I would be jobless or ill for an extended (but temporary) period of time.

Seamus, thanks for this. It is confusing, really don't know what to do. I suppose the 'fear' is what keeps the insurance industry going...

Tazz T

One of the biggest rip offs going. It's virtually dead in the UK now. Check some of the articles of lovemoney.com. That's a horrendous amount you're paying too. You would be far better off overpaying your mortgage by that amount every month, reducing your capital owed more quickly and reducing the period of the mortgage.