Life Insurance as Guarantor – a Headache for Irish Mortgage Applications
You’re not over the moon that your parents must offer themselves as guarantors for your mortgage, but your lender has insisted – so you grudgingly agree.
There’s no way you’ll get the mortgage otherwise.
But you don’t want to force the added expense of life insurance on your parents at their age.
But the bank, again, insists they take out life insurance as guarantor.
You’re stuck between a rock and a hard place.
Your parents will struggle to pay the exorbitant price they’re being quoted for life insurance as guarantor.
But you won’t get a mortgage without a guarantor.
This is a classic Catch-22.
What can you do?
Dig Your Heels In & Quote Legal Mumbo-Jumbo!
Like this:
Consumer Credit Act, 1995 (155-page PDF)
126.—(1) Subject to the provisions of this section, a mortgage lender shall arrange, through an insurer or an insurance intermediary, a life assurance policy providing, in the event of the death of a borrower before a housing loan made by the mortgage lender has been repaid, for payment of a sum equal to the amount of the principal estimated by the mortgage lender to be outstanding in the year in which the death occurs on the basis that payments have been made by the borrower in accordance with the mortgage, such sum to be employed in repayment of the principal.
the lender can insist on borrowers taking out a mortgage protection policy
(2) Subsection (1) shall apply as respects all housing loans except
(a) where the house in respect of which the loan is made is, in the mortgage lender’s opinion, not intended for use as the principal residence of the borrower or of his dependants,
mortgage protection not required for rental properties.
(b) loans to persons who belong to a class of persons which would not be acceptable to an insurer, or which would only be acceptable to an insurer at a premium significantly higher than that payable by borrowers generally,
mortgage protection not required if the cost of cover is excessive
(c) loans to persons who are over 50 years of age at the time the loan is approved
mortgage protection not required if the borrower is over 50
In plain English, the bank can proceed without cover for the guarantor if the quote is excessive or if the guarantor is over 50.
Life Insurance as Guarantor – Conclusion
Arm yourself with the Consumer Credit Act as above, but remember that your mortgage lender makes the final decision.
In our experience, they will waive the requirement for life insurance as a guarantor, assuming your parents are happy to sign the waiver.
The waiver will confirm that your parents are aware of the consequences of not having sufficient mortgage protection insurance and are happy to proceed regardless.
If the bank won’t grant you a waiver and you need competitive quotes for your parent, please complete this questionnaire, and I’ll email you your quotes right away.
Thanks for reading
Nick
