Many people have ceased to make capital repayments by switching to interest only on their mortgage. However, they may not be aware that their Mortgage Protection Cover Life Cover will also need to change to a Level Term Policy. A level term policy is for a set amount of cover and unlike regular mortgage protection cover, doesn’t decrease when capital payments on your mortgage have been suspended. With sufficient Level Term cover in place, an interest only mortgage will be cleared when you die. Not a thought that anyone likes to dwell on but one that we need to be aware of for the financial security of our loved ones.
For example, if a person bought a house with a mortgage of €300K in 2007, but switched to an interest only option in 2008, three years later the deficit between the sum assured on their Mortgage Protection Life cover and the amount outstanding on the actual mortgage could now exceed €20K. Unfortunately, this could seriously expose the family of the deceased and compromise their financial security in the future.
Having a level term assurance policy in place would meet this need.