Please take a minute to read our 3 top tips for mortgage protection policies.
1. Most mortgage protection policies are assigned to banks to cover loans from borrowers, but what most people don’t realise is that you don’t have to use the same company that provides the mortgage and you can change the provider at any time, if you can find a better price. There has never been a better time to review your cover. For example one provider is offering to match the lowest price on the market and then give an additional 10% discount for the full term of the policy. Terms and conditions apply.
2. If there are two people on the mortgage, the mortgage protection is normally sold on a joint life first death, decreasing term
basis. This means the cover should reduce in line with the mortgage and the cover pays out on the death of the first life and should clear the mortgage. We have a provider that with give dual life cover for a premium increase of only 2%. This essentially doubles the cover as a claim on one person will not affect the cover on the other.
3. The trend for couples to co-habit, rather than marry, has become increasingly more common in Ireland. Cohabiting couples are still treated as strangers for Inheritance Tax purposes. The stranger threshold for inheritance Tax is currently €15,075 Inheritances in excess of €15,075 are subject to tax at 33%.
Example. John and Mary buy a house in joint names. They contribute equally to the deposit, mortgage repayments and joint mortgage protection policy. John dies in the first year of the mortgage (House valued at €500,000). Mary inherits 50% of property (assuming held as joint tenants). The mortgage is cleared by the Mortgage Protection Policy. As Mary is not married she is liable for inheritance tax. Marys half of the property is valued at €250,000 less the €15,075 = 234,925 with tax at 33% = €77,525.25. Mary needs to find €77,525.25 or sell the property.
This gives rise to a big problem that is easy to solve if done before death. Each person takes out a mortgage protection policy on the others life and pays the premiums.
We advise that you seek professional legal and tax advice as the information given is for guideline only and does not take into account your personal circumstances. The examples included are for guidance purposes only and are not based on any real individual circumstances and should not be constituted as advice in any particular instance.