Your questions answered: ‘If I can’t get insured over mental health issue, will I lose mortgage offer?’

​Q I’ve been approved for a mortgage for €240,000 as a single applicant, and one of the last steps I have to tackle is getting mortgage protection.

I got in touch with a broker but have been declined three times for cover because I have a generalised anxiety disorder and was once hospitalised for it for a month. I’ve been on antidepressants and in therapy for years, so my anxiety is under control.

Is it true that if I’ve been refused cover by three providers that there’s no need to get mortgage protection? If so, how would my mortgage be paid off if I die prematurely? I’m 42.

Alicia, Co Dublin

​A It sounds like you’ve explored the options, and based on the declines for cover you mention, you can request a waiver of life cover from a mortgage lender. What this means is that you’re asking the bank to grant you a mortgage without the standard condition of life cover being in place.

Just because you have been declined cover doesn’t automatically mean you do not need to get mortgage protection: a standard condition of all mortgage lending is that life cover is in place to clear the mortgage in the event of death. As such, if you cannot meet this condition, you’ll need to request a waiver and that waiver must assessed by the bank.

While a basis for a waiver request is a minimum of two declines from life providers, it is up to the individual bank to consider if they will proceed with the mortgage without cover in place.

It’s important to raise this with your mortgage lender as early as possible. Such requests are reviewed on a case-by-case basis. You should not sign contracts on any property purchase without this waiver consent in place.

In general, it’s very important to have life cover when your mortgage is accepted or to know your position if a decline or postponement will be issued. I would suggest you speak to your mortgage lender and submit a request for a life cover waiver accompanied by the decline letters. If your current lender is not happy to proceed, then apply to other lenders.

If your lender accepts the waiver and you do not have life cover in place, then in the event of death during the mortgage term, your mortgage would be cleared by way of sale of the home.

Just because you have received a decline now does not mean that you will not get cover in the future. It would also be worthwhile to get advice from a broker on whether the providers gave a timeline for when cover might be considered, should your condition remain under control.

Q I’m currently renting, at a cost of €1,200 a month, but have my eye on a house that costs €350,000. I already have €290,000 in savings, due to the sale of a small business and because I inherited some money from my late father. Would a bank give me a mortgage of €60,000?

I’ve heard that lenders don’t like to give small mortgages for some reason.

Eamon, Co Kildare

A Yes, you should be able to secure a mortgage of €60,000, but not from all lenders.

The main pillar banks have a minimum mortgage level of €50,000, which would meet your requirement.

However, some of the other lenders, including some of the new lenders and non-bank lenders, have a minimum mortgage level of €100,000. And all the lenders have a minimum mortgage repayment term of five years.

Regardless of the mortgage amount, the banks will still underwrite the home loan based on the three pillars of mortgage lending – your income, the deposit and its source, and clear evidence of repayment ability.

Even though the mortgage you propose is relatively low, the bank will still need to assess your income.

You noted that you have sold your business, so just be mindful that you will still need to be in receipt of a sustainable income in order to borrow at any level.

Your loan-to-value (LTV) ratio is very strong, based on the proposed mortgage compared to the expected purchase price of the house, which is a positive for you given that many lenders tier their interest rates by loan-to-value ratios. With an loan-to-value ratio of less than 50pc, you should be in a position to secure a favourable rate.

Based on the rent you’re currently paying, you are certainly demonstrating repayment capacity for a mortgage of €60,000 so all is in order there.

You might want to ensure any taxes that might be applicable to your inheritance or the disposal of your business have been dealt with and that the full €290,000 is available towards the purchase of the property.

Another consideration for your budget is the transaction costs you’ll need to pay to complete the purchase, such as stamp duty and legal costs.

Stamp duty is 1pc of the purchase price and legal fees would be approximately €3,000.

This may impact your mortgage level if you need to use savings for these additional costs.

‘If I can’t get insurance over health issue, will I lose my mortgage offer?’

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