Mortgage Protection Topup

New mortgage will be circa 60k more than current mortgage. Our current mortgage protection policy allows us to increase by 40k which would leave a shortfallof 20k. As we are older we are trying to see can we avoid a whole new Mortgage Protection Policy and the delay it will involve because medicals, GP reports etc will be required and things are moving faster than anticipated with house purchase.

On the Competition and Consumer Protection website it states:

If you are topping up your mortgage, you need to make sure that your policy meets the new value of your mortgage. You could get a new mortgage protection policy for the total amount of your new mortgage, or just for the top-up amount.

Compare the costs and benefits of both options. It may be cheaper to keep your original mortgage protection policy and then buy a second policy for the top-up amount.

Has anyone ever gotten a separate policy for the difference? Thinking if it was only for 20k it might be approved quickly without need for medicals and GP etc, but also thinking it might overcomplicate things. No medical issues. We may just try and make the 20k up ourselves either.

Just wondering is this as straightforward as it looks on the CPCC Website.

Thanks for any feedback.

A small policy for the top-up will be more straightforward than a full replacement policy. You will need to get a statement of the remaining balance on the original policy from your insurer. Then you assign both policies to the bank.

20k mortgage protection is really tiny though and the insurers will have a minimum premium level. You may find there's very little difference in price between 20k and 60k in which case you would not need to increase your current policy.

Compare the cost of both options on a price comparison website.

lmd said:

Has anyone ever gotten a separate policy for the difference?

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AFAIK you can have multiple policies once the lender is satisfied that they are assigned to them. My own lender told me that recently.

As you are older I would start the process ASAP, and with several providers. The medical stuff can take a while so try to ensure it doesn't delay the purchase.

I may need a a top-up myself for a new mortgage next year and my homework (limited so far) is that a top-up is cheaper than a whole new policy.

I wouldn't be rushing to get extra cover unless the lender insisted on it. Worst case scenario a mortgage holder dies and there's a €20k shortfall. They're not going to repossess or force a sale for such a relatively small amount even if they insist on collecting it.

What ages are you? Technically a lender can waive the life cover requirement if you are both over 50, however of course it is their decision whether or not to do this! For the sum of 20k they just might do it easily enough. If not then no reason why you can't have separate policies to get to the total required.

ClubMan said:

I wouldn't be rushing to get extra cover unless the lender insisted on it.

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I would disagree and say do rush. You don't want the stress of the sale being held up by delays getting medical reports from your GP if required. Better to have it sorted and not need it, especially for such a small sum.

The application forms are all online and over email, so it's quick and straightforward to apply.

Corola said:

I would disagree and say do rush. You don't want the stress of the sale being held up by delays getting medical reports from your GP if required. Better to have it sorted and not need it, especially for such a small sum.

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100%.

I would even have it taken out in advance and assign to the lender before drawdown.

It's peanuts in the scheme of a house sale. If the borrower doesn't require it you just cancel the insurance after drawdown.

Thanks for all the replies. Incredibly annoying that Broker never suggested this as an option!

It's crazy that lenders insist on a mortgage protection policy for 100% of the mortgage amount. In the event that one of the borrowers dies before the mortgage is cleared, so what if there is a €20k mortgage remaining after the policy pays out?

Brendan Burgess said:

It's crazy that lenders insist on a mortgage protection policy for 100% of the mortgage amount.

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It's a legal requirement as per the Consumer Credit Act 1995 Brendan! I'm not old enough to remember whether the logic was to protect borrowers or lenders or both.

A quick google suggests some countries have similar regulatory obligations (France, UAE). UK, Germany, Netherlands don't have it. Canada and Hong Kong have it up to a certain LTV.

Dr Strangelove said:

It's a legal requirement as per the Consumer Credit Act 1995 Brendan! I'm not old enough to remember whether the logic was to protect borrowers or lenders or both.

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It may not be mandatory in this case?

lmd said:

As we are older we are trying to see can we avoid a whole new Mortgage Protection Policy and the delay it will involve because medicals, GP reports etc will be required and things are moving faster than anticipated with house purchase.

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(2) Subsection (1) shall apply as respects all housing loans except—

...

(c) loans to persons who are over 50 years of age at the time the loan is approved,

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ClubMan said:

It may not be mandatory in this case?

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Indeed it may not if they are over 50 and the lender agrees to waive.

My response was in reply to @Brendan Burgess 's assumption was that mortgage lenders are doing they insisting. They are not, it's the law.

Apologies I forgot to say that yes we are both over 50. I find the problem is getting to speak to someone in the various institutions who knows what they're talking about in relation to their own policies. Existing policy is through a Broker from a few years ago when we took it out.

First mortgage approval was with Capital Credit Union for 292k (Purchase price is 700k). They advised that mortgage protection IS required even by over 50's. So we contacted the original Broker to apply for the 40k topup which at the time would have brought us up to 285k, we would have just asked the Capital Credit Union to reduce the mortgage offer to 285k and take the hit on the 7k shortfall out of the 20k we had put aside for necessary work to property. Broker sends out a form for us to complete which is a proposal form for new policy. Rang Broker who said 'yes I thought that was strange'. No help at all. Rang Aviva to query and got what appeared to be new staff member who kept putting us on hold to check our queries with other staff (no issue with that obviously), but again hadn't a clue and told us well that's the form you have to fill in. Stupidly we accepted this and started just looking for new mortgage protection policies for the full amount, just online quotes etc. and all obviously require us to go through medicals even though neither of us have any health issues. About three weeks of this with nurses ringing both of us to arrange medicals and GP reports being sent out etc. even just after the online quote stage (yes I know we might have had medicals completed by now if we had just gone with it at that stage but are also aware that all of this can over run and drag out and we are under pressure from Vendor). Eventually my OH asked for the Manager of the Brokers on Friday (as person he was dealing with previously was not replying to him and turned out was on annual leave with no out of office on) and had to basically talk him through how the topup on the policy works and he seems to have agreed to that. We've sent over whatever paper work he asked for by email on Friday.

We had also applied to AIB and in the meantime (after taking 2 days to respond to every update logged to their portal), we have approval for 300k, and a slightly lower rate. I did phone them and advised that we both have death in service policies and other benefits and felt yet again that I was talking to someone who just didn't deviate from the script and just said we still need the mortgage protection. So current situation is hoping to go with AIB, will not know exact figure of our existing mortgage as it depends on when sale closes. So I have a call scheduled with a Broker I've seen recommended here to enquire about getting the other topup policy (though if it's only for 20k they might not be interested). Honestly though getting to talk to someone who knows what they're talking about seems to be impossible and I'm envisioning all sorts of issues trying to get this over the line because nobody seems to have a clue what they're doing if it's not a straightforward transaction.

Dr Strangelove said:

It's a legal requirement as per the Consumer Credit Act 1995 Brendan!

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Agreed. I should have said that it's crazy for the CCA to insist on it.