Mortage Repayment Insurance

bluphoto7

Around 90% of the people at my work have been given notice of intention to make them redundant at the end of November this year. I have to say that I'm one of the lucky ten percent who have been retained, although who is to say for how long. I'm not sure how viable our facility is on such a small crew.

Anyway, just in case, I sorted out redundancy insurance cover for my 80k mortgage back at the beginning of May - with at least six months still to go before the first redundancies hit us. When asked if I was under threat of redundancy at the time, I truthfully said that I was not.

I have 20 years still to go on my mortgage and am currently paying around £600 per month. I am on a good wage and I could probably afford to be paying twice that if I really had to.

As such I was toying with the idea of reducing the period of the loan to ten years, and then if I AM made redundant then the insurance will - I think - cover the repayments at twice the rate of what I am currenrly paying.

I still won't be out of pocket as I'm still paying off the same loan amount, and when I fnid myself more secure, then I will be in a position to remortgage anyway, extending back out to 15 or 20yrs.

Does anyone know if I can reduce the loan term (Halifax) without remortgaging or if I have missed something with which I could come a cropper.

thanks
Blu.

dunstonh

As such I was toying with the idea of reducing the period of the loan to ten years, and then if I AM made redundant then the insurance will - I think - cover the repayments at twice the rate of what I am currenrly paying.

Doesnt work that way. You pick monthly sum to be insured to and is what they will consider (providing it doesnt exceed around 50-60% of your income). You would need to increase that sum insured, which will increase your premiums.

You need to be very careful here as well as a number of ASU providers will say you are not covered for the first 6 months or when you know there is the chance of redundency, even if that is just over 6 months.

bluphoto7

I get it, although I'm not at risk of redundancy, unless the company changes its mind and shuts the whole place down instead. The mortgage guy didn't ask if my work colleagues were at risk of redundancy. - Even though at the time they weren't (and I don't believe even now) are officially "at risk" in the legal sense, as the company is still "rooting out" transfers for them. I believe only at Aug 30 do they legally become "at risk".

One other question - do people have to continue paying the ASU premium while claiming ? - I obviously don't need to be covered against redundancy if I'm already there.

cattie

You don't have to pay premiums whilst claiming, but you need to bear in mind that a lot of these insurers will research thoroughly to ensure there was no prospect of redundacy in your company when you took out the policy. This won't just relate to your job, it will be the likelihood of redundacies being made in the company.

If they suspect that the policy was taken out because you had forward knowledge of a possible future redundancy then they may refuse to pay out & you will have wasted your premiums.