If your income stopped for any reason – redundancy, illness, accident – would you be able to keep paying your mortgage? Without mortgage repayment insurance, quite possibly not.
At the moment, with more and more businesses folding and more and more jobs being lost, this is a real issue. Can you be sure you won’t be next? If your employer goes bust, you may well not even get a redundancy payment.
Up until recently, many people were very wary of mortgage repayment insurance. It was often mis-sold or turned out to be a waste of money. However, the government has forced a shake-up in the mortgage repayment insurance market, and now there are minimum standards that policies must meet or exceed. You can now buy a policy with much more confidence that it will be suitable for your requirements.
So who are the people who should especially consider mortgage repayment insurance?
• You may have stretched yourself financially with your mortgage – many people in the past decade have been forced to do this in order to get on the property ladder at all.
• You may have little or no equity in your property. In fact if you originally borrowed a high loan-to-value amount and the value of your property has now fallen, you may well have negative equity. If you suddenly lost your income, there would be no possibility of remortgaging to tide you over.
• If you are employed in a sector where demand is falling, or that is dependent on demand in other areas of the economy, you do need to take precautions against possible loss of income. For instance, the automotive sector is reporting considerable reduction in demand. If a local car manufacturer goes out of business or reduces output, this will affect dozens of other supplier firms in the area. In turn this will affect other companies such as travel firms who are dependent on high employment for their own level of demand. It’s no good waiting until there is an actual threat to your own job before taking out mortgage repayment insurance – it will then be too late.
• Does your employer have a proper sickness payment policy in place (i.e. one that continues to pay all or part of your salary when you’re off sick)? If you’re not sure, ask – you’re entitled to know. Talk to the Human Resources department or your union representative. State sickness benefit will certainly not cover your mortgage payments, so if you won’t get sick pay you need insurance.
Remember you don’t need to get the mortgage payment insurance from your mortgage lender. A standalone policy is likely to be more suitable and you should be able to find one to fit your individual requirements. Talk to a broker who will help you shop around and find one that will give you value for money – and, of course, peace of mind!