TENS of thousands of homeowners may be under-insured on their mortgage protection, according to today’s Irish Examiner, with 20% of mortgage holders leaving their families open to thousands of euro of legacy debt.
Almost 155,000 homeowners are struggling to repay their home loan each month. More than 60,000 householders are already in arrears for three months or more and a further 36,000 have restructured their mortgages to interest-only repayments but may not have adjusted their mortgage protection cover to reflect this change.
“Many people may be unaware of the serious consequences of being in arrears or making interest only repayments,” said Joe Charles, marketing manager at Caledonian Life, which has just completed an analysis of the latest Central Bank figures.
“The value of the average amount of arrears has been calculated by the Central Bank at €27,000, with these borrowers typically having €200,000 each outstanding on their mortgages. In the event of the mortgage holder dying, if the partner or family were unable to fund the outstanding €27,000, the bank could ultimately repossess the house.”
Caledonian said people may not be aware that when they fall into home loan arrears, their mortgage protection life cover needed to be reviewed.
Greg Dwyer, Caledonian’s head of sales, said: “Many people have ceased to make capital repayments by switching to interest-only on their mortgage. This is totally understandable considering the considerable financial pressure people are under.
“However, they may not be aware or have simply forgotten their mortgage protection life cover also needs to be changed to a level-term policy.”
Caledonian contended that as Ireland struggled to deal with the mortgage debt problem, consumers would need to address issues such as mortgage protection.
Mr Charles warned of the uninsured gap being created by the tens of thousands who have switched to interest-only or have fallen into arrears. He advised anyone struggling with mortgage repayments to contact a qualified broker.
“Your local broker will be more than happy to give you professional and impartial advice as to what actions an individual should consider if faced with this unfortunate predicament.”
Mr Charles also advised switching to a level-term protection 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, the mortgage will be cleared should you die.
“It’s not a thought anyone likes to dwell on, but one that we need to be aware of to ensure our loved ones are financially protected.”