Mortgage Protection Premium - How to benefit when making lump sum mortgage repayments

B

buyingabroad

Registered User
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Hi all,

If I went for a mortgage protection policy (the one that reduces in line with the mortgage), how do I get the benefit of paying a lower premium whenever I make a lump sum payment against the mortgage. Are the rules for doing this clear or could one be exploited by the MP provider?

For example, if my mortgage on day 1 is €400k over 25 years. MP premium is say €100 per month. I repay €50k of the mortgage in month 7. Does the €100 per month reduce to €100 x 350/400 = €87.

Thanks for your help.
 
Re: Mortgage Protection Premium - How to benefit when making lump sum mortgage repaym

Mortgage Protection life assurance premiums are usually fixed. So in the circumstances you describe, the only way to get a lower premium would be to cancel the original policy and apply for another one with the lower cover.

It won't always work - the premiums will be getting dearer as you get older and if your health deteriorates you may not be able to get a replacement policy on favourable terms.
 
Re: Mortgage Protection Premium - How to benefit when making lump sum mortgage repaym

You could take out a more flexible policy. It will cost more but it should also give you the opportunity to decrease the sum assured.

It would probably be cheaper to take out a new mortgage protection policy for the reduced amount (before cancelling any existing policies). But as Dave already pointed out all policy premiums will increase with increased risk and age, so it may well turn out to be a false economy.

You may find (depending on your age and health) the premium difference for an amount of 50K might not be significantly lower anyway.
 
Re: Mortgage Protection Premium - How to benefit when making lump sum mortgage repaym

PM1234 said:
You could take out a more flexible policy. It will cost more but it should also give you the opportunity to decrease the sum assured.

It would probably be cheaper to take out a new mortgage protection policy for the reduced amount (before cancelling any existing policies). But as Dave already pointed out all policy premiums will increase with increased risk and age, so it may well turn out to be a false economy.

You may find (depending on your age and health) the premium difference for an amount of 50K might not be significantly lower anyway.
Click to expand...

In the case of a mortgage top up, is additional protection mandatory? We are talking of a top up < 20K?

Thanks

S.
 
Re: Mortgage Protection Premium - How to benefit when making lump sum mortgage repaym

suzie said:
In the case of a mortgage top up, is additional protection mandatory? We are talking of a top up < 20K?
Click to expand...

If the property is your home, you are under 50 and in good health, yes it is.
 
Re: Mortgage Protection Premium - How to benefit when making lump sum mortgage repaym

I've heard from a guy that works in the trade that mortgage protection is just a racket. Apparently the mortgage gets paid for only a little while and only after you've been out of work for 6 months or so. I think the criteria for making a claim are so tight that you'd basically get nothing, in exchange for paying loads of money. He said the best thing a person could do is cancel the policy altogether and never take another one out. He said you'd be better off saving the insurance money to pay your mortgage yourself if you're out of work etc.
I'm only relaying this info and it's not my opinion. What do you guys think of this?

ollie
 
Re: Mortgage Protection Premium - How to benefit when making lump sum mortgage repaym

Last poster, I think you are confusing mortgage protection with income protection? Mortgage protection ensures that the mortgage is paid off in the event of the holder's death.
 
Re: Mortgage Protection Premium - How to benefit when making lump sum mortgage repaym

ollie323 said:
I've heard from a guy that works in the trade that mortgage protection is just a racket. Apparently the mortgage gets paid for only a little while and only after you've been out of work for 6 months or so. I think the criteria for making a claim are so tight that you'd basically get nothing, in exchange for paying loads of money. He said the best thing a person could do is cancel the policy altogether and never take another one out. He said you'd be better off saving the insurance money to pay your mortgage yourself if you're out of work etc.
I'm only relaying this info and it's not my opinion. What do you guys think of this?
Click to expand...

Mortgage Repayment Protection pays a claim for a maximum of twelve months and typically starts paying after 4 weeks. Income Protection pays a claim right up to retirement age, but only starts after at least 13 weeks.

You should always familiarise yourself with what is and is not covered with any form of insurance before taking it out. That way, you can avoid falling into the trap of paying for something you don't understand and thus being disappointed when you find out something isn't covered.
 
Re: Mortgage Protection Premium - How to benefit when making lump sum mortgage repaym

Related question so if I make a lump sum payment of 50k and have reducing balance mortgage protection.
On death the mortgage will be paid off and there would be a circa 50k surplus.
Would this be paid out or would the cover only be for the mortgage balance.
 
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