Mortgage Protection

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walsh101

Registered User
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I took out a 25 year mortgage in 1992 so now there is only 10 years remaining, however this year I paid off a lot of it and now there is only €8,000 outstanding. My question is how come the figures for the Mortgage Protection and the Repayment Protector are still the same, surely if myself or my husband died most of the mortgage is already paid, or if one of us was ill the monthly mortgage is a lot less than it was originally. I rang the building society that we have a mortgage with but they waffled on for ages without giving me a direct answer as to why these fees are still the same. Can anyone explain if this is correct.

Thanks in advance
 
Mortgage protection are decreasing term assurance policies, designed to pay off the outstanding balance of a loan in the event of a premature death.

A couple of assumptions are made in the calculations. 1 relates to interest rates payable during the mortgage term.

No assumption is made on bullet payments. If you have made one then the sum assured will now be in excess of the outstanding debt, and in the event of a claim that excess would be an asset of the deceased's estate.

HTH
 
Thanks for replying, not sure if I'm reading you right RS2K are you saying that if one of us died before the mortgage period was up that the other person would get the the full amount that we originally mortgaged for or at least their estate would and that's the reason the Mortgage Protection fee we are paying is still the same as it was originally, because then that makes sense now.

And Clubman are you saying that it's not compulsary to have Mortgage Repayment Protection, I know it's a must when you have a big mortgage but now that I have a big chunk paid off can I reduce this because the building society never gave me this option, because I can't see the justification in charging the same monthly fee for MRP when the new monthly mortgage is less than a quarter of what it was.
 
walsh101 said:
Thanks for replying, not sure if I'm reading you right RS2K are you saying that if one of us died before the mortgage period was up that the other person would get the the full amount that we originally mortgaged for or at least their estate would and that's the reason the Mortgage Protection fee we are paying is still the same as it was originally, because then that makes sense now.
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Did you read the thread that I linked to? It clearly explains the difference between reducing term and level (including convertible) term mortgage protection life assurance. In either case the premium will be set at the outset and will not change for the term - unless you shop around and get cheaper cover elsewhere.
And Clubman are you saying that it's not compulsary to have Mortgage Repayment Protection
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It is mandatory for all owner occupiers with some minor exceptions (e.g. refused cover for medical reasons and lender waives the normally mandatory requirement for such cover).
I know it's a must when you have a big mortgage but now that I have a big chunk paid off can I reduce this because the building society never gave me this option, because I can't see the justification in charging the same monthly fee for MRP when the new monthly mortgage is less than a quarter of what it was.
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As above - the premium is determined at the outset based on the mortgage amount, term, your age, health/smoking status etc. and does not change thereafter. That's just the way it works. If you can get cheaper cover for the amount outstanding (or the original amount if you wanted level term cover) then go for it and replace the existing cover with the new one. Bear in mind that if you bought cover from your lender rather than shopping around then you probably did not get anything near the best deal on offer at the time.
 
You appear to have 3 choices here. (1) keep the existing level of cover. Any excess over the mortgage amount will be paid into the estate upon death. (2) Talk to your MP company and reduce the existing cover. (3) Take out a new policy for the reduced mortgage amount with another company. All lender requires is cover for the outstanding amount.
 
Thanks all, once again you have explained it so that I can understand what I'm paying for. Its a pity that the staff in the building society couldn't do the same. No doubt I paid over the odds for MP & MRP back in 1992 'cos I got the cover along with my mortgage and it's a pity there wasn't a site like this one to get as much info as possible beforehand and also I was naive back then.
 
walsh101 said:
No doubt I paid over the odds for MP & MRP back in 1992 'cos I got the cover along with my mortgage
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Probably. And many MRP policies are very bad value for money because the premiums are inflated with excessive charges/commissions and the policies often only pay out in restricted circumstances (e.g. you cannot get any job and not just one in you area of expertise) and for restricted periods of time (e.g. 12 months in total and no more). If you still have the MRP policy then perhaps you should consider ditching it? And see if you can get cheaper MP? Better late than never...
 
Beware, beware, beware...the difference between Mortgage Protection cover (decreasing life cover over term of loan) and Mortgage Payment Protection (insurance cover to protect against inability to make monthly mortgage payments in the event of loss of earnings). Life cover is compulsory, the latter is not, and the latter is also usually very expensive, and of limited value anyway (often to a max of 12 months cover). If the life cover is more than you need, even if decreasing, get a new quote for less cover, but as previously stated, any excess over the loan at this time is simply for teh benefit of the survivors.
 
oopsbuddy said:
Beware, beware, beware...the difference between Mortgage Protection cover (decreasing life cover over term of loan) and Mortgage Payment Protection (insurance cover to protect against inability to make monthly mortgage payments in the event of loss of earnings). Life cover is compulsory, the latter is not, and the latter is also usually very expensive, and of limited value anyway (often to a max of 12 months cover). If the life cover is more than you need, even if decreasing, get a new quote for less cover, but as previously stated, any excess over the loan at this time is simply for teh benefit of the survivors.
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Yeah - that's why I pointed the original poster at the key topic on this stuff in my first post above.
 
Yes, I saw that Clubman, and an excellent thread it was too. However (and I know YOU know the difference) I got the impression in one of the above multi quote replies that the OP may still be confused, ie, where he asked:

"...are you saying that it's not compulsary to have Mortgage Repayment Protection"

and you replied

"It is mandatory for all owner occupiers with some minor exceptions (e.g. refused cover for medical reasons and lender waives the normally mandatory requirement for such cover)."

I know you know the difference, but I think even you got your wires crossed there in your reply!

I'd say to most people, get rid of your mortgage repayment protection policy! They are not a requirement, and they are good commission earners for the sellers, and they are of very limited value!
 
Fair point about the potential confusion above.

I would agree with you about MRP - in some cases it may be justified but in most I doubt it.
 
Thanks Oppsbuddy, you actually answered a question I was going to ask because Clubman had gotten me confused again when he said MRP was mandatory to have and then said they were bad value for money and perhaps I should ditch it


Good to know the even the experts get MP & MRP mixed up at times, why can't the powers that be change one of names so they aren't so similar sounding or is that the way the like it !!!!!!!!
 
Actually I would normally use the terms mortgage protection life assurance and mortgage repayment protection insurance just to be clear but I was echoing your abbreviations above - i.e. it's your fault that I got confused! ;)
 
why can't the powers that be change one of names so they aren't so similar sounding or is that the way the like it !!!!!!!!
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I think the name confusion is no accident!
 
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