It is estimated that approximately 2,200 mortgage holders in Mayo have switched to interest only mortgage payments to assist with affordability, but according to Caledonian Life these homeowners may now be leaving their families open to thousands of euro of legacy debt. The most recent report from the Financial Regulator would suggest that this switch has become a common cost saving strategy, as the public attempt to deal with affordability issues in the current recession. The leading life insurance company said it is believed that up to 50,000 struggling mortgage holders throughout the country have had to switch to interest-only repayment terms or otherwise restructured their mortgages since the recession began three years ago, but that most may not have adjusted their mortgage protection cover to reflect this change.
“In simple terms, once people stop making capital repayments, the mortgage protection policy may not be sufficient to clear the mortgage in the event of their early demise, leaving a legacy debt for their families to deal with,” said Tadgh Malone, Mayo broker consultant at Caledonian Life. “There are approximately 22,000 mortgage holders in Mayo and we would estimate that 2,200 are on interest-only repayment terms. Many people have ceased to make capital repayments by switching to interest-only on their mortgage due to considerable financial pressure people are under.
“However, they may not be aware or have simply forgotten that when they do this, their mortgage protection life cover also needs to be changed to a level term 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, an interest-only mortgage will be cleared should you die. 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.”
