Mortgage insurance cover could help you to avoid arrears as it would supply you with an income that would go a long way towards ensuring that you would not fall into mortgage arrears if you lost your own income. You might suffer from a loss of your income if you were to fall a victim to unemployment by redundancy or if you suffer incapacity caused by accident or sickness.
You could choose to take out mortgage insurance cover with the lender or you can take out a policy with a standalone provider. If you choose the lender then they will work out how much it would cost to protect the whole of your mortgage and then add this into the amount you borrow. This would mean you pay interest on not only your mortgage but also the protection for it. With the independent provider you would be able to pay monthly premiums for the protection based on how old you are at the time of applying for the protection, the level of cover you take and the amount of your mortgage you want to protect. The amount you choose to protect would be pre-agreed with the provider and is the amount of money given back for the term of the cover. This income is paid tax free each month after the deferment period which is between the 30th and the 90th days of your redundancy or incapacity. Payments would continue on a monthly basis for either 12 months or 24 and then protection ceases. You might need protection for both unemployment and incapacity, however due to your circumstances you could also choose between protecting against unemployment alone or incapacity alone.
With mortgage insurance cover behind you there would be a substantial sum of money coming into the home each month which would go towards meeting your monthly mortgage repayments. This can stop you from falling into mortgage arrears which would be essential if you are to be assured of keeping the roof over your head. Should you fall into mortgage arrears of just a couple of months then the lender might allow you to make a repayment plan. However if you have not got anything coming into the home this would be impossible and so the next step would be for them to take you to court to seek repossession. If a judge agrees then you could be evicted from your home. A policy can be a better form of lifeline than risking being able to claim State benefits towards your mortgage repayments. You would have to prove you are eligible to claim an income from the State and even if you are any income the State paid towards your mortgage repayments would only be towards the interest part.
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