Mortgage protection is rarely talked about by people buying houses. Amidst the excitement and piles of paperwork involved with purchasing a property, mortgage protection can seem like just another complicating factor. However, if times do get hard, this step might just save you from serious financial hardship and from even repossession of your property. Here are the top 5 tips on mortgage protection.
1. Think realistically about circumstances in which you might struggle with your mortgage
Mortgage protection is an insurance policy which will cover the borrower for a fixed term in unexpected or unforeseen circumstances such as illness, injury or redundancy, where the usual income generated to pay the monthly mortgage repayments becomes unavailable. Most people need to generate some sort of income in order to pay the instalments so you should consider if there is a possibility of you losing your earning power, and how you would pay in that situation.
2. Don’t go with the first offer
Different providers offer different types of mortgage protection. They will usually cover injury, illness or redundancy but the monthly tariffs will vary, so it’s best to shop around and find the best deal. Your mortgage provider will probably suggest you choose their offer, but it may not be the best deal for you, so keep an open mind until you have done the research.
3. You don’t have to have mortgage protection
Many people choose not to have any mortgage protection at all. If you think the monthly payments are too high compared to the risk of losing your income, or that you could safely cover your mortgage repayments through your savings or other means, mortgage protection may not be for you. Remember, if you make monthly repayments and remain employed and healthy, the money you have paid will not be returned to you.
4. Don’t rush into a mortgage agreement unless you can pay under normal circumstances
While mortgage protection will cover you in the extreme circumstances of illness, injury or redundancy, meaning you lose your regular income, many people will sign up to a mortgage with unrealistic expectations on how much they can pay without any of these setbacks. There are plenty or other reasons why people stop paying their mortgage, such as rising costs due to lifestyle, unchecked overspending or spiralling debts outside of the mortgage. Mortgage protection will not save your house if you suffer from these problems, since your main income may well remain unaffected (and just no longer cover all the bills). If you take on a mortgage, make sure other factors will not prevent you paying it.
5. Talk it through with others
Failure or difficulty to pay monthly mortgage repayments later on will probably affect more people than yourself. It can therefore be helpful and considerate to discuss mortgage protection options with your partner or family, or anyone your choice might affect in the future, to prevent trouble later on. Losing your home is one of the most distressing things that can happen to a person, and many relationships will not recover from this loss – make sure everyone involved is on board before you make your decision and honestly consider all the fact, making an open and informed decision.
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