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Interest Only...Please Help!

  • 13-01-2011 9:34pm
    #1
    carrollmc
    Registered Users, Registered Users 2 Posts: 3 ✭


    Hi, have been accepted for interest only payments with KBCand they have sent me two forms. One is a letter of variation which I understand. The other is a letter of Assignment which states that I need to have mortgage protection life cover for "the sum of not less than 110% of the loan amount or if the policy is an assignable level term policy it must cover the amount and term of the loan". There is a form to accompany this part which must be signed and witnessed and must be "stamped appropriately". Can anyone explain this to me. I thought everyone had life cover from the start of the mortgage as they had too. Do I now have to get further/top up on our cover?
    Any help would be really helpful as this application has taken a month now and am really struggling to come up with next month full payment
    Tagged:


Comments

  • #2
    ferga_com
    Closed Accounts Posts: 159 ✭✭ferga_com


    It's likely that your current Mortgage Protection life assurance policy covers you for the amount of your mortgage in the event of your death and the cover decreases as you're paying off your loan.

    However, you're now going interest-only for a period and so the balance of the mortgage is not decreasing for this period. If your current Mortgage Protection policy continues to decrease and the mortgage balance doesn't, then after a while the policy won't be covering the full debt any more.

    So KBC are telling you that you need to have either: -

    (1) a reducing cover Mortgage Protection policy with cover of at least 110% of the mortgage balance, to make allowance for the fact that your balance won't be reducing for a while or

    (2) a level policy where the cover doesn't decrease at all.

    If your current policy isn't already one of the above, it'll need to be amended or replaced.


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