Keeping mortgage protection after selling house

barry2012

Registered User
Messages
15
Hi,

I was searching for an answer in other posts but I couldn't see the exact scenario and I just wanted some advice.

I took out a mortgage on an apartment in 2006 and got a reducing mortgage life cover with accelerated specified illness cover. There is approximately 300,000 left on the policy.

If I sell the apartment in the next few years and completely cover the remaining amount left on the mortgage, can I continue to hold the life/specified illness cover? In essence , do I have to cancel the life cover when the mortgage it was taken out on has been paid off?

Thanks very much in advance,

Barry
 
All depends, if the policy is a block policy through the lender then yes it will probably cancel on repayment of mortgage, I thought this sort policy didn't exist anymore but after previous discussions here it appears some lenders still use them.

If it is a standalone policy then no reason why you can't keep it on, it will continue to go down in value over the years as though it was tracking a reducing mortgage until the original end date of the mortgage but could be good cover in the intervening years if there is some reason you are unable to replace it at this stage with another policy.
 
Thanks for that,

I'm assuming it's a standalone policy. The mortgage is with KBC and the policy is with Irish Life. Also had to sign a letter of assignment for the life cover.

It would be useful to keep the policy due to changed medical circumstances.
 
Well then it should be possible to keep it, just get the assignment removed when the mortgage is cleared.
 
You might have a convertible option in it, where you can take out another policy with same company IRRESPECTIVE of changes in health. Check with your broker
 
People get confused when it comes to mortgage protection policies. Most of them (I'm not sure if block policies are still put in place) are stand alone policies. The cover reduces assuming an interest rate of 6%, not in line with the actual mortgage. For instance, as rates are lower than 6% for the last number of years, if there is a pay out there would be a surplus amount after the mortgage is cleared. That is given to your estate.

The bank just wants to make sure the mortgage is cleared in the event of death, so they have you complete a deed of assignment saying they have first dibs on the money. If you paid off the mortgage, they have no interest in the policy anymore so they write to the insurance company and say they no longer have an interest in the policy. It is entirely up to you what you do with the cover then.


Steven
www.bluewaterfp.ie
 
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