Mortgage - Life Cover?

Hopejack

Hoping to apply for a mortgage Spring time next year.

Anyway, we've owned two properties in the past and took out life policies on both of them. In addition, we set up another policy a while back - this was to cover us for a larger amount due to DH's work which was risky at the time. I was worried about me and the kids should something happen to him as I'm not working. Think the policies are worth about £290k in all. Mortgage would be for about £75k ish.

So, now we have 3 (yes, talk about complicated) life policies which all end at different times - all within about 4 years of each other though. The first one is due to end in about 15 years from now and then then other two follow. Mortgage will be for 25 years from next year.

So, qu is. If we take out a repayment mortgage will the lender want to see proof of how we'd pay mortgage off should anything happen to DH as he's the earning one? Will they accept these life policies eventhough they could leave us with a shortfall period of up to 8 years or so without cover? i.e. they expire before the mortgage term ends? I don't want to take out another policy. Would there be any way of extending what we already have for a further period if we had to on one of the policies say? We are much older now and as a result obv any policy taken out would cost us significantly more! :rolleyes:

Senior_Paper_Monitor

Most lenders advise you to take insurance (protection) but do not make it a condition - that said, it is obviously sensible to be insured adequately.

From the situation you describe - you are effectively spending more than you need, to get less adequate cover than you should have. It would seem to be a good time to have a review with a qualified adviser and consider a complete reorganisation on that front (ensure that this brings any will and trust issues up to date).

Hopejack

I suspect you are correct but I'm still unsure whether it would cost us more now to have one consolidated policy because of our ages now - off the top of my head we are paying around £50 pcm for around £290k life cover. I will ensure we get some advice on this before we start the ball rolling with lending..... DH also has work cover which would pay it off in the gap years - presuming he stays there forever more of course!

jamesperrett

There are comparison sites like Moneysupermarket that let you fill in your basic details and will give you an idea of how much you can expect to pay. They showed me that I could save around £10 per month compared to the deal that my mortgage company was offering. I just contacted the best offer and told my exising insurer to cancel the policy once the new policy was in force.

Cheers

James.

dunstonh

jamesperrett wrote: »

There are comparison sites like Moneysupermarket that let you fill in your basic details and will give you an idea of how much you can expect to pay. They showed me that I could save around £10 per month compared to the deal that my mortgage company was offering. I just contacted the best offer and told my exising insurer to cancel the policy once the new policy was in force.
.

Thats fine but comparison sites are known to focus on price and not features and options. It is not an uncommon DIY error to buy reviewable premiums instead of gauranteed or compare critical illness to terminal illness thinking they are the same thing. Things like guaranteed insurability tend to get ignored as well (average consumer hasnt a clue what it means). Personally, I think guaranteed insurability is important and have over the years utilised it for clients a fair few times. The cheaper plans tend to leave this off.

If you know what you are doing then you are better off getting an execution only IFA to do it. Not a comparison site. If you dont know what you are doing then get an advice IFA to do it as the consequences if you get it wrong will be more than the couple of pound in savings.

magpiecottage

I agree with dunstonh.

I would go further - the loan will be for 25 years but the policies only run for 15. Worse, if they are mortgage protection assurance, which goes down, they will reduce considerably faster than the mortgage does while they are in force

Even if you did have a 15 year mortgage for the exact amount covered by the policy it is probably worth requoting for the balance of the term because premiums often fall a bit because of something called mortality drag - which is an actuarial concept not a cross dressing Grim Reaper!

Hopejack

Thanks for the advice, one of the policies is linked to inflation so is actually increasing yoy. One of the other policies (the one with the longest left to run) is a fixed amount. It's only the first policy we took out (when we were a bit green!) that reduces over the term.

Actually, if it were that we were short by 10 years it wouldn't be an issue as DH could afford the mortgage on his own (if I were to go) or if he were to go he's covered by his work. As our mortgage will be small really, we hope to overpay at some point too so hope (ha ha!) in theory to have it paid off before the 25 years are up anyway.

I will of course ask the chap who set up the last policy to review with me but I can't see it being an issue and I can't see that cancelling all the policies and starting again, some 7-10 years down the line is going to make it any cheaper to be honest. Worth considering though!