Many people availed of investment property mortgages during the boom. Many of these properties are in negative equity at present and most of the investment mortgages were done on an interest only basis.
Something to be aware of, is that most people did not put mortgage protection life cover in place on these type of mortgages as it was not compulsary to do so, as it was not the family home. The problem can be in the event of premature death of one or both of the mortgagees. If we take a typical example where there is a mortgage of €250,000 on a property that may currently be worth less than €150,000, in such an event, selling the property will not clear the mortgage (and would not be permitted by the lender unless the balance could be shown that it could be paid.) What typically happens in this circumstance, is that over €100,000 of someone’s personal or family life cover gets used to cover the rest of the mortgage leaving much less for the purpose that it was designed for – to protect the family!
It’s one of the aspects of planning that gets overlooked in the current climate and if you fall into the above category, it may be well worth reviewing your cover levels to ensure they cater for such an eventuality.
As always, any queries on this or any other aspects of cover or financial planning, feel free to contact me or call into either our Drogheda or Skerries offices.
I got asked a question about how someone’s family home is affected by negative equity with regard to their mortgage protection. It has no effect at all, as the cover is related to the mortgage amount, not the value of the house. So in the event of a claim, the mortgage would be cleared and the house would then be mortgage free.