Applying and getting a mortgage is a long-term obligation. The maximum repayment period for owner-occupier mortgages can extend for a maximum of 35 years in Ireland. But, we all have to be prepared for the harsh realities of life. Just imagine what the situation will be if one who pays the installments per month or per quarter expires suddenly. The responsibility of paying the debt falls on other family members who might not be prepared enough to suddenly take charge of the repayment.
If the loan is pending and not paid as per the agreement, it can lead to the confiscation of the property. These types of situations can lead you and your family members to emotional and financial shocks.
Hence, any responsible home buyer who has taken a loan should be prepared in advance to protect their family from such an unforeseen situation. This is why home insurance protection becomes so crucial and in some cases, imperative!
Here, comes the concept of mortgage protection policy. Mortgage insurance is designed to pay off your outstanding loan in case you die suddenly. This kind of policy runs for a similar duration like your mortgage, and the cost of premium can depend upon many factors like the amount of mortgage you have taken, your age, your health status, whether you smoke or drink, etc.
As your mortgage balance reduces over the term, the amount of coverage also decreases, which means mortgage protection is generally cheaper than level term insurance. It is the most effective type of life cover.
But many buyers make mistakes while choosing a mortgage protection policy. Here is a list of top 5 mistakes to avoid when buying or choosing a mortgage protection plan.
Mistake no. 1: Continuing with the same policy when cheaper and effective options are available
Irish people need to buckle up and shouldn’t be slow when it comes to saving money. You have changed to other utility providers from Electric Ireland or any other brand. Same way, you can also change your mortgage protection cover any time for added price benefits and make notable savings than before.
The steps included in switching to a cheaper policy are:
- Check the level of your existing policy and know how much you are paying
- Compare your current cost with other mortgage protections available
- Ask your mortgage protection broker or adviser to go through alternative quotes
- Ask your mortgage protection adviser to do the paperwork and issue you a new cheaper, effective policy
- Do not cancel your existing policy before the new policy has been issued
Mistake no. 2: Choosing a mortgage insurance provider by price alone
It is crucial to choose an insurance service provider with competitive price options. But, you also have to make sure that the insurer you select is financially stable and has good customer reviews. The best way to do it is by comparing all Irish insurers to get the best quote.
There are leading giants like Aviva, New Ireland Assurance, Royal London, Standard Life, Zurich, and more. Wouldn’t it be better if you could compare all these in one place! Click here to compare and get the best quote for mortgage protection.
You can also ask friends, family members, or colleagues about their experiences with mortgage insurance companies. Choose a company that will act in response to your requirements and handles claims reasonably and efficiently.
Mistake no. 3: Giving up, if your application for a mortgage is rejected for the first time
You should not give up on your dream home if your mortgage application is not accepted.
In case your mortgage application gets refused, you can do a lot of things to increase the chance of getting the loan next time. Don’t hurry up and reach out to dozens of other lenders because each application would turn up on your credit report.
The most frequent reasons for a refused home loan application could be poor credit history, not registered as an Irish voter, and repeated application for credit, huge debt, any payday loans within last 6 years, documentation errors on insurance company’s side, not enough earnings, not coming under lender’s selection of demographics, and more.
You could seek help from a professional mortgage broker or a financial adviser who has industry experience in dealing with mortgages of all sorts, especially homes. They are aware of the requirements of different lenders and help you make your papers accordingly. They can also speak to the lenders on your behalf.
Mistake no.4: Not being aware of new mortgage protection policies
Let’s start this with an example from the current scenario. Is there any impact on mortgage insurance schemes due to the COVID-19 crisis? Many buyers are concerned about what if they have been tested positive for COVID-19. Lenders may postpone coverage if they sense there are additional risks concerning such issues.
Your existing mortgage protection policy generally includes coverage for the death of the policyholders if you have a joint policy. If a death’s cause is COVID-19, the policy would still payout like normal.
But, if you hide underlying medical conditions at the time of submitting an application that increased your possibility of being affected by the coronavirus and caused death, it would not pay out in that case.
Mistake no. 5: Buying the insurance from a bank
Banks provide a range of services to their customers alongside core products. When banks sell mortgages, they try to up-sell mortgage insurance, home insurance, etc. Buyers often find it easier to wrap up complex paper works at a time, all in one place without comparing the cost benefits.
However, it should be kept in mind that banks are not insurance companies. Unlike an independent financial adviser or a mortgage protection broker who acts as an unbiased intermediary and helps you compare the best products and prices from reputed insurance companies in Ireland, banks usually have tie-ups with just one lending company. A good broker can give you more options, as well as tying in other insurance products such as buildings insurance for your new property. If you have a non-standard property and you need a specialist product like coach house insurance, self build cover or unoccupied cover then again find a niche broker who can help.
So, you do not get a chance to compare and choose the least expensive policy. Besides, it has also been found out from a survey that nearly 47% of Irish respondents felt that their banks put pressure on them to purchase mortgage protection policy from them even if they find it expensive.
So, you might like to avoid banks if you want price benefits while buying mortgage protection.