Mortgage Protection Policy and releasing equity

[techman]

I am currently releasing some equity.

I have been told by my bank to take out a separate MPP for the released sum. I intend paying back the released sum over 4 years. Told that the minimum term for an MPP is 10 years.

Broker told me to cancel my existing MPP and take out a new one for the total amount outstanding (remaining balance on mortgage + released equity) over the remaining term of the mortgage.

Have since heard from a friend who released some equity that you don't need to adjust the MPP at all!

Anyone?

 

[Sarah W]

You will need mortgage protection for the amount and term of the equity release. If the term is four years you should take the policy for four years (you were told 10 years is the minimum because commission is based on the term - 8% a year for a max. of 10 years; so if you took a 10 year policy the commission will be 80% of the first year's premium - on a four year policy it would only be 24%). If you are initially taking the equity release over the remaining term of the mortgage then your broker is correct - a new policy for the whole debt may well work out cheaper. Crunch the numbers.

A mortgage protection policy - accident, sickness and redundancy - is not mandatory in any event.

Sarah

www.rea.ie

 

[techman]

Thanks Sarah.