Mortgage arrears and/or mortgage restructuring arrangements impacting mortgage holders could mean that thousands of homeowners in Ireland are unknowingly insufficiently covered by their mortgage protection policy.
Where a homeowner was to pass away and the life insurance does not adequately cover the outstanding mortgage due to under insurance, it could leave the surviving homeowner with an unexpected, and potentially substantial, financial shortfall. This is according to leading protection provider Royal London who is alerting mortgage holders that may have fallen into arrears, to make sure are not now financially exposed.
As a result of the financial crisis in the 2000’s and the economic downturn that followed, around one in eight mortgage holders (at its highest in 2013 ) in Ireland fell behind on their payments.
Royal London caution that it is likely that some of these people may be underinsured, regardless of whether they are still in arrears today, or if they entered into a restructuring arrangement with their lender at the time.
Royal London point to data from the Central Bank of Ireland which shows that the number of principal dwelling house mortgage accounts that were classified as restructured at end-December 2021 was 47,062.
Figures also show that in December last year the number of Irish principal dwelling house owners in mortgage arrears for more than two years was over 21,000.
“We believe a significant proportion of the over 47,000 families who have restructured their mortgage may not have reflected these changes in their mortgage protection cover. If that’s the case, it means they are not covered for thousands of Euros that they owe to their lender. Mortgage protection policies generally cannot be restructured, and in most cases a new policy would need to be put in place to reflect the fact that the mortgage isn’t reducing or to match the revised mortgage agreement.
“Understandably, this could come as a great source of shock and worry to a property owner following the death of their co-owning spouse or partner. It could mean they are left with a shortfall on their mortgage at a time when they can least afford it. And while it’s possible that the lender might write off the uninsured balance in such an instance, it would be unwise for any mortgage holder to rely on the possibility of such ‘generosity’ on their behalf,” Proposition Lead at Royal London, Barry McCutcheon, commented.
There are 21,675 homeowners that are in long-term arrears (over two years ) and are therefore likely to have a far greater shortfall in their mortgage protection, assuming that they’ve maintained the premiums on their policy.
“We know that the impact of the pandemic has tested the financial resilience of many Irish homeowners who may have dipped into their savings or lost out on earnings over the past two years. Being underinsured on their mortgage protection could come as a nasty surprise to homeowners at a time when it’s needed the most. If you’re a mortgage holder concerned about the adequacy of your mortgage protection, we recommend speaking with a Financial Broker who can provide advice based on your individual circumstances,”
There are 21,675** homeowners that are in long-term arrears (over two years ) and are therefore likely to have a far greater shortfall in their mortgage protection, assuming that they’ve maintained the premiums on their policy.
“We know that the impact of the pandemic has tested the financial resilience of many Irish homeowners who may have dipped into their savings or lost out on earnings over the past two years. Being underinsured on their mortgage protection could come as a nasty surprise to homeowners at a time when it’s needed the most. If you’re a mortgage holder concerned about the adequacy of your mortgage protection, we recommend speaking with a Financial Broker who can provide advice based on your individual circumstances,” Mr McCutcheon concluded.
