Mortgage Payment Protection Insurance

 

 

Do you ever worry about what might happen if you become unable to keep up with your mortgage repayments? In fact, you are probably reminded constantly, as ads for secured credit are now required to tell you that you are at risk of losing your home if you fail to meet your obligations under the loan. This can be a very significant stress for people, and Mortgage Payment Protection Insurance is the answer.

Mortgages are a type of secured credit. They are secured over your home. This means that if, for whatever reason, you fail to repay the loan, the lender will have a direct right over the property. The lender will be able to take possession of your home, and sell it in order to recover the debt. They are obliged to seek a fair market price for the property, and whatever is left over after they have repaid the loan, and taken out all their extra fees for having to resort to repossession, they will give you the remaining balance. It can be a very harrowing experience. Luckily, we live in a time when repossessions are quite rare, but they have been a lot more common in the past, and if interest rates were to suddenly rise by a significant amount, we know that we would see an awful lot more.

This is where mortgage payment protection insurance steps in. This type of insurance is designed to step in in certain circumstances and make your mortgage repayments for you if you become unable to do so. It will not make the payments in all circumstances, and it will not keep repaying your mortgage for ever so you have to read the terms of each policy carefully before hand to see what exactly is included with each Mortgage Payment Protection Insurance policy.

Generally speaking, this type of insurance will step in to take over your payments if something happens that is not your fault. If the economy slows down and you are made redundant at work, this will usually be covered. But if you are fired for misconduct, or quit your job because you are unhappy, this will not be covered. Likewise, while there may be some cover for an increase in mortgage rates, becoming unable to afford higher mortgage payments because of higher mortgage rates will in most cases not be covered. However, this is something that you can protect yourself against by taking out a fixed interest rate loan.

So you must consider very carefully, when considering mortgage payment protection insurance, if it will pay out in the circumstances that you are interested in protecting against. If it does, then well and good, if it doesn’t however, then it is probably not worth getting. Many policies will cover against accident or long term illness.

Mortgage payment protection insurance can also be quite expensive. In some instances, you may wish, instead of taking out insurance, checking to see if your lender will allow you to make over payments on your mortgage and then if your circumstances do get worse, you can take a payment holiday. However, there may still be cases when you do want to insure your ability to keep up with mortgage repayments and this can be a very useful type of insurance if this is the case.

 

 

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