Switching mortgage provider-updating mortgage protection assurance

[PippaK]

We’re moving our mortgage and the new loan agreement is one month longer than original - 16yrs paid with 10yrs left on our mortgage. Our life assurance policy say it can’t be amended to fit the new agreement. So we have to take out a new much more expensive policy. Any ideas? My OH is 11yrs older than me so now over 60 which seems to be driving the price up.

 

[ClubMan]

We’re moving our mortgage and the new loan agreement is one month longer than original

Is the outstanding loan amount remaining the same? I.e. you're not borrowing extra? Is the new lender insisting on different cover on account of the extra month? If so then just reduce the term of the new loan by one month and transfer over the existing policy? Or just reassign the existing policy to the new lender and take the miniscule risk that you're not covered for one month at the end of the loan term when practically nothing will remain outstanding?

 

[PippaK]

Yes I missed the finer details in the loan offer. It’s to get a fixed rate so I guess they have a deal for 10yr mortgages when we have 9+yrs only left and they added 6k onto the loan amount I’m not sure why. Maybe we have to go back to the drawing board and get a new loan offer? It’s a pain as we’re stuck on 8%interest with a vulture fund at the moment.

 

[ClubMan]

and they added 6k onto the loan amount I’m not sure why

This seems very strange. Why don't you know the details of your loan and the amount that you're actually borrowing?

It’s a pain as we’re stuck on 8%interest with a vulture fund at the moment.

Even if, after shopping around as widely as possible, the cost of new mortgage protection life insurance is high maybe the savings accruing from switching away from the vulture fund far outweigh this cost so that it's not really worth worrying about the cost of the insurance?

You could try seeing if the lender might waive the need for cover for the older borrower (or altogether) but this should only be considered if you can deal with the situation in which a borrower dies and the loan isn't cleared at that point.

Or see if you can just reassign the existing policy and the new lender will accept that even if it means that you may not be covered for the full amount and/or for some period towards the end of the loan term?

In the latter case maybe they'd accept assignment of the existing cover and then a small additional policy to make up the shortfall in the amount/term covered?

 

[Landscape]

Something similar happened to me years ago when doing a switcher mortgage. At the time the bank (KBC) for our new switcher mortgage advised that our existing mortgage protection would suffice even though there was a small discrepancy over the cover amount/duration. Maybe in the region of 2k, can't fully remember. You could try advising/asking the new bank that you plan on using your existing policy and see what they say.

 

[ClubMan]

You could try advising/asking the new bank that you plan on using your existing policy and see what they say.

Yes, I should've mentioned this at the outset. Just ask the new lender if reassignment of the existing policy as is would be acceptable to them. If not then consider some of the other options.

 

[Corola]

An additional small policy to cover the excess amount is likely be very cheap.

For example, €10,000 dual-life mortgage protection for 10 years, for a 55 + 65 year old, costs €10 per month if in good health.

 

[PippaK]

Thanks all, for your advice I wasn't allowed post within one hour of previous post. I've gone back to the mortgage provide and also applied for a new policy to see how much we can get it for.

 

[ClubMan]

Have you asked the new lender if they're ok with reassignment of the existing policy with any shortfall made up using a second smaller policy? No point in doing anything else until you know that they're ok with this approach.

 

[PippaK]

No. We’ve applied for a whole new policy for the full amount and period. The quote we got was a little cheaper than what we’re currently paying so fingers crossed it works out. We’ll cancel the old policy then.
I was annoyed with Irish Life as they wouldn’t quote me a new policy saying we had to go through our old broker even though it was 16yrs ago when we took out the policy. They said they can’t deal with us directly. New policy won’t be with Royal London