A mortgage is often ones major monthly debt, and also one that is essential to ensure a roof over your head. Mortgage insurance is not a choice but a necessity, and one that needs to be considered very carefully, especially in these days of economic turmoil.
Mortgage payment protection insurance, to give mortgage insurance its full name, is designed as a temporary measure, and does not relieve the onus on the home owner to keep up payments on an outstanding loan. Loss of employment or illness can be covered by a mortgage insurance scheme, and with requisite terms attached.
Often, the duration of illness or unemployment will determine how soon the insurance scheme becomes actionable, as policies can start anywhere from 30 – 90 days after the event happens.
When considering a mortgage insurance scheme the small print needs demands careful scrutiny; policies are varied and are generally offered by high street lenders and provided as an add-on to a loan. However, an often cheaper option is to go with a standalone provider of the insurance.
Relying on State assistance is not an option. Recent changes in government procedure has seen a ceiling of £200,000 put on the agreed Mortgage Interest Scheme, designed to help affected families deal with loss of work and difficult in repayment.
The terms attached to this scheme are somewhat controversial, as an individual needs to have been out of work for a regulation 13 weeks. Many have commented that this leaves the individual with a considerable period during which he has to pay the mortgage without an income to draw on, and that lenders may begin proceedings to repossess before the government aid is able to be claimed.
This is where a mortgage protection insurance policy can kick in and help towards maintaining the monthly repayment.
It is imperative that the mortgage payment protection insurance taken out is sufficient to cover the entire monthly payment (subject to the provider’s set limit which is typically £1,500 a month or half the insured’s gross income) , and that any exclusion clauses are taken into account. Exclusion clauses can be applied by insurance companies in order to cover themselves in extreme events – becoming out of work soon after securing the loan is generally not covered, and there will likely be an excess period applied during which claims can not be made, similar to the 13 week delay applied to the government aid scheme.
A mortgage insurance policy taken out alongside a mortgage – a package deal – is generally the most expensive way of ensuring a mortgage is covered, so shop around among the independent brokers in order to get a good deal.
The self employed can also be accommodated within mortgage payment protection insurance schemes, although there will be conditions attached as to the nature of unemployment in these cases. Shopping around for the best mortgage insurance is a sensible move, and can ensure the best package for each individual case is secured.
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