Mortgage Protect for Interest Only.

[TheBlock]

I'm in the process of going interest only with KBC for a short period (4 Months). One of the stipulations is that I have mortgage protection for 110% of the loan or if assignable level term policy it coverS the amout and term. I have a mortgage protection policy that covers the amount of the mortage (not sure of the jargon but the amount covered decreases over the term) I'm currently over covered by approx 5k but not the required 10%. Do I have to ammend my poilcy or take out a new one? Why the need for such excessive cover given that I will be only saving approx 3K by going interest only for 4 months.Is this designed to get homeowners to take out policies with KBC?

I'm currently waiting on a copy of my policy to be posted to me by the insurance company. I

Any help or poInters as to what I should be doing would be great.

 

[Jimbobp]

You probably won't be able to change your existing policy as most mortgage protection policies don't have a guaranteed insurability or convertible option. You will need to take out a new mortgage protection policy or take out a 2nd policy for the balance required. You could also replace your existing policy with a convertible term policy, which will be more expensive but gives you more options. The bank are looking for this as you will not be paying off the principal loan whilst paying interest only and so existing decreasing cover won't be sufficent. You need to weigh up the additional protection cost against the interest only saving.


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