The struggling British economy has been responsible for a number of woes currently affecting the housing market, but none can be so painful for the individual homeowners affected as that of repossession. Yet repossessions alone have increased by more than two-thirds during the past year, not to mention the steadily increasing proportion of those falling into serious arrears with their repayments. Mortgage insurance represents a way of avoiding the arrears building up in the first place and can help avert repossession.
Mortgage insurance can take care of some of the most common reasons for individuals getting into trouble with their repayments. During the current recession, of course, chief of those reasons, of course, is likely to be redundancy and the indeterminate period of unemployment that follows whilst looking for another job. Equally devastating blows, however, can be dealt by the need to take unpaid leave of absence from work because of an accident or illness – the effects of which can all too easily take several months or more from which to recover. Mortgage insurance would come to the rescue in any of these events by paying out a regular, tax-free monthly benefit from which the whole, or a substantial portion, of the mortgage repayments could be made.
Figures recently released by the Financial Services Authority help to show just what a critical role mortgage insurance could play. During the past year, for example, the Authority says that the number of repossessions has shot up by 68%. Furthermore, in reports carried by the daily Telegraph newspaper on the 18th of March 2009, the Financial Services Authority revealed that the number of homeowners falling into arrears with their mortgage repayments had risen by 31%. These statistics were considerably higher than those previously released by the Council of Mortgage Lenders.
Those homeowners protected by mortgage insurance, however, would find that their mortgages continued to be paid even when they were incapacitated from work, by an accident or illness, or unemployed, because of compulsory redundancy. This type of insurance continues to pay out the insured benefits regularly each month until the policy holder is earning normally once again after having recovered from the accident or illness or having found alternative employment, or for up to a typical maximum of 12 months (some policies offer the option of extending this period to 24 months, on payment of an additional premium). For the vast majority of homeowners, therefore, the period of guaranteed insurance benefits with which to keep up the mortgage repayments lasts quite long enough a time in which to recover from most accidents and illnesses or in which to find a new job.
Most sized mortgages can be covered in this way, since mortgage cover can generally be arranged amounting to a typical maximum of £1,500 a month, or the equivalent of 50% of the policy holder’s normally earned gross salary, whichever is less.
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