Mortgage without Life (Term) assurance.

Roy1234

My partner & I are thinking of borrowing around £20-30k to move up to a house costing around £130-140k, the balance coming from equity & savings. We both have good credit ratings (a lot more savings than debt), are both around 50, and are thinking of a 10 to 15 year mortgage, or else personal loan if too small to mortgage?

Term assurance, which clears the balance in the event of death, is obviously a good idea which I'd normally take out, but following a recent medical condition, I'd struggle to get it. From what I've read, it isn't compulsory despite what many people think. My question is, would a lender be likely to refuse the mortgage/loan for not taking it out?

Before anyone asks, yes we're fully aware that the other would need to be able to meet repayments if something did happen to one of us.

As a secondary question, a personal loan (assuming they'd lend that much for the purpose) would obviously charge a higher interest rate, but is there any practical advantage of buying with such a loan instead of a mortgage?

ACG

You dont need term assurance - it wouldnt make the slightest odds to a lender - especially not with the figures your talking about - from their perspective they could easily sell your house for £20-30k should it go into arrears, so theyre taking very little risk.

A personal loan may not be secured against your home - so that would be the obvious benefit.

As for your medical condition it doesnt automatically mean you cant get life insurance - you may get it with an exclusion or a higher premium than someone without the condition - a lot more info is needed though.

Roy1234

OK, so it won't affect my chances of getting the loan, which is nice to know.

Am I right in thinking that £20k is the lower end of what lenders would want to be bothered mortgaging? And would a bank see a £20k personal loan (split equally between two customers) as OK for this topup purpose? I read a lot of stuff about difficulty borrowing in the press.

As regards the medical condition, I'm 2 years into a 5 year 'risk window' following the removal of a cancerous mole, and I'm not sure what cover I'd get (or its affordability) whilst still in the major risk period.

ACG

Your correct £20k is the minimum generally speaking - some lenders MAY offer less but i cant think of any off the top of my head.

I cant really talk about personal loans, i dont have much of a clue.

You may be able to get life insurance with a cancer or skin cancer exclusion with a standard rates premium - dont quote me on that, im just thinking on the positive side, it all depends on Drs and surgeons notes when theyre underwriting it.

holly_hobby

PL wise the max unsecured loan is 25k - anything over this is typically on a secured loan basis i.e the creditor requiring a 2nd charge on the property.

Life assurance is not a conditional requirement of a mortgage - although if there are children involved its of course highly important as part of family protection.

If you are single, or married with no children - then your main concern is covering the amt of mortgage or joint debts - and if there were no life cover in place, if the surviving partner would be able to service the mge and household expenses on a single income assuming they can return to their normal occupation following the events of their partners death (and without having to sell the property).

Whether you are accepted at a loaded rate, or skin cancer and related conditions are excluded or you are fully declined by the underwriters - will largely depend upon your MAR, the type and how far advanced the melanoma was, and the prognosis from the specalist treating with a possible M.E reqd.

How about firstly submitting an application and then seeing what transpires ... rather than take the chance on having no life cover, purely based on an assumption that you will be declined without knowing for sure it this would be the case. (dont forget the possibility of your partners death proceeding your's, and how you would financially manage in that event - so even if you just effect a single life TA on their life, its better than nothing esp bearing in mind your medical history, and if your future working life may be effected).

Hope this helps

Holly

Roy1234

holly hobby,

Thanks for your reply. No, there are no kids involved, but we are acutely aware of how the other would manage if one of us (as you rightly say, not necessarily me) were to die. When you get the 'bad news' skin cancer meeting, they give you a booklet letting you know that you may be refused for life assurance, mortgages, jobs etc, as if to aim another blow at your already shaken-up world. In one sense, it'd be nice to wait for the 5 years to be up. But in another, time becomes more precious when you're confronted with your mortality in your middle years.

But yes, you're right, I will try for TA at least, it doesn't hurt. We both have a large blanket pension based Life Assurance via employee pensions, but no-one can make long term job assumption nowadays.

Incapacity to work, rather than outright death, is in some ways a greater financial fear, but I suspect PPI would cost a fortune?

ACG

PPI isnt really sold now due to the bad press - its also underwritten at claim stage which isnt ideal.

You may mean income protection/Permanent health insurance? It wont be the cheapest - partly due to age, partly due to medical conditions.

holly_hobby

The protection vehicles in the event of incapacity to work due to ill health are :-

PHI - payable on a regular basis after a waiting period and until NRA, recovery or death - with a max combined benefit ( from occupational benefits, other illness policies or state benefits) of 2/3 of earned income (maybe restricted further for high earners). A series of claims may be made throught the policy term for qualifying events as and when they occur.

Critial Illness (can be costly premium wise) - payable by a lump sum upon diagnosis of a Critical Illness (skin cancer is not automatically payable under CI, as it is not always a critical or terminal illness - although it may be (as happened to my a friend of mine). So payment wil depend upon the diagnosed stage by the consultant and if contained by the performed surgery). Importantly - if the condition of the indiviudal does improve, and/or does not lead to early death, as anticipated by the medical expert, the payment remains valid and cannot be reclaimed by the provider.

Mortgage Protection (MP) or Accident, Sickness & Unemployment (ASU) = payable on a regular basis, for involuntary unemployment, illness or incapacity, with a maximum payment period of 12 mths

Have a chat with an whole of market broker, who wil be able to walk you through the various protection policies in the market, and determine which one may be suitable to your requirements - of course any exclusions may apply re your medical history as discussed earlier.

Hope this helps

Holly x

Roy1234

AGC/Holly,

Thanks for the clarifications. Given, as you mentioned, my age & health history, I'd kind of assumed that illness related cover would be either unavailable or else unaffordable. Trying the keep to a low LTV is my own way to minimize the risk side. Anyway, I will seek some more advice from some kind of broker.

Cheers,

Roy.

getmore4less

First direct do £10k

Conrad

Roy do yu really want to be wasting money on £20k worth of cover?
Given your recent health history and ages, it will be expensive. Maybe just stick it in a high interst savings account each month.

I'm sure leaving a small mortgage behind wouldn't be the end of the world, and the upside of saving is YOU keep all that money that would have gone on insurance.