Approximately 95,500 homeowners nationally are now in arrears for their principal home for more than 90 days and the majority of these may be potentially under insured on their Mortgage Protection.
That’s according to analysis of the latest Central Bank figures by Caledonian Life, who said that of the 95,500 homeowners who are in arrears for three months, many could be unaware of the need to reflect any changes to their mortgage repayment structure in their Protection policies.
In Limerick, 10.8 per cent of mortgage holders are in arrears and the increase in restructuring arrangements is leading to potential underinsurance issues for households. This in turn, the survey says, could lead to potential repossessions in the event of the mortgage holder dying, leaving families unable to pay the debt.
Caledonian have set out the following example: if a person was €30,000 in arrears and had €250,000 outstanding on their Mortgage. In the event of the Mortgage holder dying, if the partner or family were unable to fund the outstanding €30,000 owed to the lending institution, they could potentially repossess the house.
“According to a Moodys report from less than a year ago 10.8 per cent of people in Limerick have defaulted on their mortgage and unfortunately it is unlikely that this has decreased with the latest Central Bank figures revealing that arrears are on the up and so too are restructure arrangements for home loans, with nearly 80,000 mortgage accounts classified as restructured,” added Tadgh Malone, Caledonian Life representative in Limerick.
Mr Malone went on to say that “Interest only arrangements and reduced payment arrangements continue to account for the majority of all restructures in place. These will both have a knock on effect on the adequacy of the Mortgage Protection policies people have in place.
However, there is a solution available for those that find themselves in this challenging situation, according to Mr Malone.
“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. However we would urge anyone considering changing any aspect of their protection policy to take expert advice before making any final decisions”.