Mortgage Payment Protection -Query on Part payments

etravels

Hi folks

I am one of the fools who purchased during the boom years, 2005, got my first house to get on the lovely property ladder. Anyhow, I lived in the my lovely house till last year 2010 to which I moved in with my fiance in his house.

I am renting my house out to which it only covers 3/4's of the mortgage and my tenants wanted me to drop the rent a futher 100 this year. We managed to compromise and get it down 50 so now I am paying more myself on the house.
example :rent = 600
My mortgage = 985
equals to €385 I am paying into my house every month plus paying the rent with my fiance on his house.

When I bought the house I took out a mortgage payment protection along with Life insurance (don't want to mix them up), and this MPP covers if I get sick and /or made redundant which is cruical in these times. I have reasonable good job but I know I could be made reduandant in the future as company not doing too well.

This MPP is €80 a month, pretty hefty as it was originally €50 but with the recession it hiked up to €80, a furthe 30 quid. I have being loyal and paying up to last year until they told the insurance company have gone bust and that I need to switch to another one. They are trying to get me a deal and now I can get one for €53 euro which is cool until I read the small print......you can only make a claim if you are living in the house and paying the bills which is understandable. I am happy with that but I asked the question if I could pay a reduced fee to cover the remaining money on my monthly mortgage, ie 385 (I am on a variable so that keeps increasing). They said I am not covered

So does anyone know if you can get a MPP on situations like this? I have being probably a fool to be paying the full 80 euro for the past 7 months or so ...Anyone any ideas as my current one is up today and I need to act fast.......
Would I be better to save the money than pay a fee to these insurance crowd? does any insurance companys cover me? Anyone else in this situation,please help?

Thanks all
Emer

The_Conductor

Hi Emer-

You actually have several issues here.

1. Mortgage Protection policies, akin to those offered on PPRs are quite uncommon for buy-to-let properties (as you're not living in the house- irrespective of your intentions, it is now classified as an investment property).

2. The normal way of approaching this- would be to take out life assurance sufficient to cover the outstanding balance on the mortgage in the event of your death.

3. Policies with redundancy clauses in them- are now as rare as hens teeth- its highly unlikely (but not impossible) to get them.

4. Illness cover, redundancy cover etc- you need to seriously check the small print of your current policy- normally these only apply to owner-occupied dwellings.

5. You need to shop around and see whats available to you- I know Caledonian Life and New Ireland Assurance both have packages designed for people in your position (but have no idea how these compare to other products).

6. Rents are falling- and your tenants are entitled to an annual rent review. By law prevailing market rents are the yardstick that would normally be applied. You were lucky they were satisfied with a EUR50 reduction in rent- its highly probable that the reductions in RA and RS in this autumn's budget will be the yardsticks by which all market rents fall.

7. Interest rates are probably going to stagnate for a while, after the increase last month. They are on the way up though- probably overtime by a full 3.5% or so. You need to factor this into your repayment capacity.

8. Just because your rental income is only covering 75% of your mortgage- does not mean that you have no taxable income attributed to the rental income. You need to get someone familiar with this sector to appraise your tax return (if you get it done once- you can do a similar exercise yourself next time).

9. An obvious solution to this would be to stop renting your boyfriends house with him- and live in your residence yourself- the mortgage is a deadweight anyhow, and only going to increase....?

10. You can take out a wholly separate type of policy- a type of 'income continuance' policy to cover you in the event of illness/redundancy. These type packages are widely available- but tend to have a short payment period- aka illness payment might only last 6 months, and redundancy payments might be a year, reduced by any income you are entitled to in the interim etc. These type policies come by many names- check them out. Its not related to the mortgage though......

etravels

Hi smccarrick

Thanks a million for your speedy reply, I will take it all into accout. Its good to know my options.

I won't be going for point 10 as we are getting married in September and his house is twice the size of mine! But I do undertand the solution! He bought in the good times, 11 years ago so his mortgage is one and half less times mine, crazy his house twice the size!!

I'll def shop around and see if my current other insurance -life can factor in the morgtage protection to cover redundancy. My current life insurance is with Irish life and it covers, illness/death/etc everything except the redundancy, hence why I took out a seperate one -mortgage payment protection.

Thanks again
Emer

mick kk

my understanding of mortgage protection insurance is that it is a total waste of money....apparantly if you do get made redundant/get sick etc. it is meant to be very difficult to make a claim...i believe that less than 1% of those that have it actually claim successfully on it....you might be better putting the savings into the mortgage

also, you mentioned you are on a variable rate...so am i...i am with ebs and i arraged to fix my payment with them ...i pay 880 per month...then, when interest rates rise, the payment doesn't change, but the length of the mortgage does...so..i used to have 18.5 years left on my mortgage but due to interest rates rising, i now have 21 years left but still pay 880 per month.

The_Conductor

mick kk wrote: »

also, you mentioned you are on a variable rate...so am i...i am with ebs and i arraged to fix my payment with them ...i pay 880 per month...then, when interest rates rise, the payment doesn't change, but the length of the mortgage does...so..i used to have 18.5 years left on my mortgage but due to interest rates rising, i now have 21 years left but still pay 880 per month.

The problem with this is as rates increase- the amount you're paying off the principal decreases, you will sooner or later hit a point where the repayment is less than the interest on the mortgage- and even if you continued paying this indefinitely you'd never pay off the mortgage. Its all a numbers game of course.

dudara

Moved to Banking & Insurance & Pensions

dudara

phormium

Repayment protection, the one that covers accident illness or redundancy, does not normally cover anything other than your principal private residence so it is unlikely that you will be able to insure the repayments on your now rented property.

Pablo Sanchez

mick kk wrote: »

my understanding of mortgage protection insurance is that it is a total waste of money....apparantly if you do get made redundant/get sick etc. it is meant to be very difficult to make a claim...i believe that less than 1% of those that have it actually claim successfully on it....you might be better putting the savings into the mortgage QUOTE]

Your correct in saying that the Payment Protection Insurance type product does have a high rate of claims being rejected due to the number of exceptions and small print in the contracts, but its not fair to say that only 1% of claims are upheld. Anyone who does have a policy should read over the T+C's carefully and familiarise themselves with what is required for a successful claim, only then can they decide if it represents good value to them.