Question re: insurance for repayment mortgage

Bennifred

Hi! Can any one tell me the position with regard to insurance if I change my endowment morgage to a repayment one? Do I need separate insurance for a repayment mortgage? I am intending to keep the endowment running, and to use any payout to reduce the repayment mortgage, but the repayment mortgage will be for a larger amount than the expected endowment payout, and will also run for longer than the current endowment mortgage. Hope that makes sense, and that someone can enlighten me!:o
Thanks in advance for any help.

payless

If it a "normal" mortgage endowment, then the life cover was set at outset ( usually same as original mortgage amount) and will not be affected by any reduction in the projected payout - ALTHOUGH the term will also not change ( although perhaps you are not really planning on having the debt longer - ie using maturity value ???) although of course if in doubt refer to provider or ask a regulated investment adviser to check the policy terms

Bennifred

Thank you for that, payless! And do I need to take out other insurance to cover the amount above the sum covered by the endowment? (I do have separate life insurance in addition, by the way). Also, presumably once the endowment has paid out there won't be any cover for the remaining time of the new repayment mortgage - does this matter? I have a feeling that I should know this stuff, but I don't!:o

payless

Its rarely a requirement to have the cover, rather just prudence

No one on here can say whether you should ( or shoudl not) have extra cover as we don't know your circumstances, and its likely that it would be regulated advice ( and not really for these boards) THAT SAID.. if looking at your mortgage in isolation

If you had £100K mortgage endowment ( now payout target is £80K) with 15 yrs left and you swapped mortgage for £100K repayment over 20 yrs, the value of the endowment ( assuming premiums still being paid etc..) on death would still be £100K, for the next 15 yrs .... after the 15 yrs you would get any maturity value , so would you use that to repay the remaining bit of the mortgage anyway ??

Bennifred

Yes, that's more or less the plan! Except that the new mortgage will be a higher amount anyway as we are consolidating a loan in with the mortgage so the endowment at maturity is highly unlikely to cover the amount outstanding at that point(or is it? hmmm...). However with any luck we may be able to overpay as we go along.... Just wanted to know whether the insurance thing was likely to be a requirement, and you've answered that, so thanks!