Today there were announcements from AIB and KBC that they would cut mortgage rates on several of their mortgage products . AIB announced that it would lower its variable rate by 0.25% at the beginning of Q3 and KBC also announced several cuts to its products – see the attached picture for a summary of the cuts.
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Life Assurance is a topic that no one wants to talk about but is something that almost everyone has to pay for at some time in your life. Below are 3 of the main reasons for buying life assurance and the types of life assurance you will need.
3 Reasons for buying Life Assurance
- Buying your own home – Mortgage Protection.
- Starting a family – Life Assurance.
- Becoming self-employed – Income Protection.
Buying your own home – Mortgage Protection
When you buy your own home most people will go to the bank for a mortgage in order to afford the home – one of the banks conditions of getting a mortgage will be that you have taken out an adequate mortgage protection policy.
Mortgage protection is a life assurance policy that will pay off the mortgage outstanding on your home if you die before you have paid off the mortgage. So if you die with €100k left on your mortgage – the policy will pay the €100k directly to the bank.
When getting a mortgage the bank will try to sell you mortgage protection however there is nothing stopping you from buying mortgage protection from a different provider – often this is the cheaper and better option as banks in Ireland don’t compare the market for you only offer products from a single provider such as Irish Life. Independent financial advisors are able to compare market for you for cheaper more flexible policies than offered by your bank.
Starting a family– Life Assurance
Having your first child is often the main reason why people start considering taking out life assurance policies – so that their family is looked after if anything should happen to the parents.
Life assurance provides a lump sum for your dependents if you die which can be used for many reasons such to provide an income for when you’re gone or to pay for college fees etc.
The cost of life assurance will depend on the type of policy you choose, the amount you choose and the term of the policy. Other factors that will affect the cost will be your age, health & personal circumstances.
Becoming self-employed – Income Protection
Becoming self-employed is a big step and you need to consider what will happen if you are unable to work. In Ireland the self-employed are not entitled to anything if they cannot work due to health reasons unlike PAYE workers who are entitled to social welfare disability benefits.
Income protection will pay you up to 75% of your income if you can’t work due to illness or disability. It will start paying out once you have been out of work for a certain amount of time – the amount of time will depend on the policy you take out.
Tax relief is also available on the cost of income protection policies at the highest rate of tax you pay so this will lower the cost.
Buying a first property is the biggest financial decision that a lot of people make and can have a huge impact on your financial well being both now and for many years into the future.
Putting in some spadework now will save you a lot of hassle in the future.
- Do your research
Find out as much as possible about the areas you are looking at. Use online resources such as daft.ie and google maps to do some preliminary research. Also google the area to see if there are any future developments planned in the area that you should know about.
One useful website is propertypriceregister.ie that contains details of all properties sold since 2010 – if you know how to use excel you can even download a spreadsheet to do some useful pivot tables to chart the movement of house prices since 2010 in the areas your researching.
- Consider the downside
Anything can happen in life so it is important to consider the worst case scenario when buying a property. Compare your monthly mortgage repayments to the current monthly rents that similar properties in the area are commanding – is there any margin of safety? If rents were to fall and interest rates rise would there still be a margin of safety?
This is important to consider as you may need to move in the future but the value of the property may have fallen. By having a margin of safety between the possible rent and the mortgage repayments it will allow you to avoid selling when the property market has crashed. Also it will allow you to cover any extra costs such as tax and repairs that come with becoming a landlord.
- Consider the future
Is there room to expand the property in the future? This is an important consideration if you are planning on having a family in the future.
What is the BER rating? If it is low make sure you build the costs of upgrading the BER into your costs.
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