Mortgage Protection on rental property.

M

mayokev

New Member
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Quick query
I have 2 houses, the family home which is covered by a life insurance policy as required. I have life insurance still on my old house that is not the family home and is now a rental property.

A financial advisor told me I no longer need the the life insurance on the second property as its an investment property and the banks don't require it.

Can anyone confirm if that is the case?
 
It is not compulsory for banks to have mortgage protection on rental properties however the bank does not have to waive the need for it if their lending policy dictates they want it, up to the bank basically.

That however is more important when one is taking out a mortgage for a rental as they can impose the MP condition on a mortgage loan offer if they like, as you already have the house and funds there is nothing they can or will do if you cancel it.
 
Don't forget that the insurance actually provides a good benefit for your estate if you die.

A lot of people who pay off their mortgage early, hold onto the life insurance for the cover it gives them.

You are older now than when you took out the policy, so life insurance might well be dearer.
If you have had any illness since you took out the policy, such insurance might well be dearer.

By any chance, is the financial advisor suggesting that you cancel it and take out a new policy through him?

If so, make sure that it's better value and that you are not taking out a worse policy so that he gets commission.

Brendan
 
While it's not a legal requirement that you have Mortgage Protection on an investment property mortgage, a lender can choose to make it a condition of the loan.

From the wording of your original post, I'm guessing that the house was once your home. If the mortgage was originally an owner-occupier mortgage then I'll further guess that there was a condition in the loan offer that you maintain a Mortgage Protection policy for the life of the loan.
 
It’s worth bearing in mind that the premiums are deductible when calculating your rental profits for tax purposes.

So, it really is very cheap life assurance.
 
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