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  • FIRST POST
    • Peter 87
    • By Peter 87 10th Feb 18, 9:50 PM
    • 43Posts
    • 2Thanks
    Peter 87
    Life Insurance - Mortgage
    • #1
    • 10th Feb 18, 9:50 PM
    Life Insurance - Mortgage 10th Feb 18 at 9:50 PM
    We are currently in the process of purchasing a property.

    We are looking at a Level Term Joint Life Insurance Policy and are considering our financial commitments.

    We have dependants and other financial commitments however are trying to understand how much cover we would need specifically for the mortgage. Should we cover the amount we are borrowing or the total amount repayable over the term of the mortgage?

    Our Mortgage Provider provided a quote however this was only for the amount we were borrowing however I am thinking that it should be for the total repayable over the term.

    Any ideas/suggestions?
Page 1
    • jonesMUFCforever
    • By jonesMUFCforever 10th Feb 18, 10:13 PM
    • 24,431 Posts
    • 11,716 Thanks
    jonesMUFCforever
    • #2
    • 10th Feb 18, 10:13 PM
    • #2
    • 10th Feb 18, 10:13 PM
    It depends on the type of mortgage you are going for.
    If it is an interest only mortgage then a level term for the mortgage amount would be advisable.
    If you are going for a repayment mortgage a reducing term policy would suffice.
    The amount of cover should equal the mortgage amount.

    You do not require cover for the total payable over the term.
    What goes around - comes around
    give lots and you will always receive lots
    • ACG
    • By ACG 11th Feb 18, 3:08 PM
    • 16,316 Posts
    • 8,425 Thanks
    ACG
    • #3
    • 11th Feb 18, 3:08 PM
    • #3
    • 11th Feb 18, 3:08 PM
    The total repayable over the term is on the basis that:
    1) You have the initial rate followed by the SVR for the full term.
    2) The SVR does not change.
    3) You do not switch products.
    4) You make no overpayments.

    If the life insurance pays out after say 10 years, the balance would be due and you would presumably clear the Mortgage off in full. If you do that, then you have avoided paying maybe 15 years worth of interest. You would also no doubt have changed mortgage products a couple of times during those 10 years.

    You only need to cover the amount outstanding, not the effects of interest etc as you will be paying that as you go along each month and then avoiding the part of the interest in the future due to paying it off early.

    Hopefully that makes sense.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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