Is Mortgage Protection Insurance suitable for interest only mortgages?
Niall O'Connor MSc CFP® QFA
Co-Founder
A Mortgage Protection policy is not suitable for an interest only mortgage.
With an interest only mortgage, the capital sum outstanding on the mortgage does not reduce and for this reason a level term life insurance policy is more suitable.
If a mortgage is in arrears and repayments are less than the conditions of the original mortgage it is likely that any mortgage protection policy in place will not be sufficient to clear the mortgage balance. In these instances, the policy should be replaced by level term policy.
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