07 Dec Repayment Vs Interest Only Mortgage Protection
Repayment Vs Interest Only Mortgage Protection
What protection do I need?
Repayment vs interest only mortgage. You may be asking yourself what protection do I need in place for either of these mortgages. In this article we will explain in depth what protection you need for your situation.
For a repayment mortgage you would need to have a decreasing term life insurance policy in place. The policy amount will decrease as you gradually pay off your mortgage.
Interest Only Mortgage:
For an interest only mortgage its best to take out level term life insurance. The outstanding loan balance remains constant over time because only the interest is paid. As the amount of debt remains constant over time, so should the amount of life insurance coverage that is why we tell our clients to get level term insurance for this situation.
What are the costs?
The cost of either protection products depends on a variety of factors such as:
- Your age
- Your health and BMI status
- Whether you’re a smoker
- The amount you want covered
- The term of the policy
Generally, Decreasing term cover is slightly cheaper due to the fact that the amount of cover is gradually going down.
If I have a pre-existing medical condition can I get covered?
As with other life insurance policies, your lifestyle and health can have an impact on the quote you receive from insurers. However, majority of people are able to get covered with pre-existing conditions with a slight increase in the monthly premium. This is called ” Loading”.
Your medical history information, as well as your occupation and other lifestyle characteristics, will be examined.
Repayment vs interest only mortgages
There are many occasions where we take a look at what someone has in place and we see that they hav ethe wrong life insurance product in place for their mortgage.
It is very important you have the correct policy in place or the following could occur:
- Your policy doesn’t pay your mortgage off in full as you had a decreasing insurance policy for an interest only mortgage.
- You could be paying too much for your mortgage protection
- You could be paying for a policy that isn’t protecting you for the correct things.