Tuesday 27 June 2017

Our mortgage is not fully covered

When we took out our mortgage, we bought the obligatory mortgage-protection policy. The sum assured was due to reduce in line with the loan, but four years ago my husband lost his job in construction and the bank allowed us to convert to an interest-only mortgage.

I recently discovered that the level of cover continued to reduce even though the mortgage didn't and the cover is now €40,000 less than the outstanding mortgage. Shouldn't the bank have dealt with this? What happens if either of us dies?

Oh dear. This looks like it fell between two stools. Either the bank didn't realise the mortgage protection should have been altered, or if you bought it through a broker, s/he may not have been aware you switched to interest-only.

Joe Charles, of Caledonian Life says you are not alone.

"Many people have ceased to make capital repayments by switching to interest-only mortgages. Just like you, they are probably not aware or have simply forgotten that their mortgage-protection cover also needs to be changed when this happens," he says.

"This is because the amount owing reduces as repayments are made. A mortgage-protection policy is designed so that the cover also reduces in line or slightly behind the amount of capital outstanding on the mortgage.

"Now that you have switched to interest-only payments, your mortgage protection cover is still decreasing, but your mortgage isn't. So the mortgage-protection cover in place is not now sufficient to cover your outstanding mortgage".

Fortunately, you can rectify this. "A level-term policy provides cover for a fixed amount of cover, ie it doesn't decrease," he adds. You need to switch to this type of product for the remaining balance of the mortgage. Happily, rates have dropped and although it will be more expensive than a decreasing-term policy, it shouldn't break the bank. Use an independent broker to get the best deal. www.iba.ie

I have four separate tenants in a house I own. I'm happy to have them, and there have been no major problems.

They have asked whether they can pay rent on a weekly rather than a monthly basis and, to be honest, this would cause me extra time and money to collect.

Can I charge them for the effort?

There is no obligation on you to change the payment of rent from monthly to weekly. Should you decide to agree to it, it's unlikely that your tenants would be prepared to pay an additional charge and you can't compel them to do so.

John Leahy from www.irishlandlord.com adds: "You mention that you have had no major problems with your tenants and in the current environment you must decide if it is worth potentially damaging what appears to be a good relationship with your tenants for the sake of a small extra payment.

"One possible option would be to allow the rent to be paid weekly, but to get the tenants to make the payment directly to your bank account avoiding the need for you to spend extra time collecting the rent".

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