Mortgage Protection

Mortgage Payment Protection Insurance

Most mortgage holders should consider taking out Mortgage Protection Insurance especially as rates are rising, more repossessions and general debt seem to be the current trend.

Brokers must be sure to differentiate between Mortgage Payment Protection Insurance and Payment Protection Insurance for unsecured loans. They seem to have been fused in to one instead of being separate insurances.

Payment Protection Insurances are a one off payment for unsecured loans that have been sold for large profits by some lenders these do not help with mortgage payments.

Mortgage Payment Protection Insurance meets requirements laid down by the Financial Services Authority. This insurance is payable monthly and can give confidence to mortgage holders so should they become ill or have an accident or become unemployed their mortgage premiums will still be paid.

With repossessions having risen 30% in the first six months of 2007 it is clear that in some cases insurance is vital. It was the Governments aim that Mortgage Protection Insurance would be taken out by 55% of mortgage holder in 2004 but this type of insurance was not taken up by the majority and only around 20% held this type of insurance by 2006.

The homeowner is responsible for mortgage payments and brokers should point this out from the onset and encourage clients to cover themselves as no one wants to be in the position of losing their home. Those not wishing to take out insurance should be asked to sign documentation to this effect.

Mortgage Payment Struggle

Many people will find that at sometime during the life of their mortgage they will struggle to keep up payments.

In the UK at the end of June, 125,000 mortgages were in arrears this is up 4% compared to the previous six months. 14,000 repossessions were made during the first six months of 2007 which is almost an 18% rise compared to the previous half year.

Lenders are, in general, sympathetic to borrowers and will only repossess property as the absolute last resort and have a range of options for those wishing to avoid repossession.

Lenders ask borrowers who find themselves with financial problems to get in touch as soon as possible so that they can implement ways that borrowers can get back on track.

The best way to tackle defaults varies from borrower to borrower but they could ask for a holiday payment, change to an interest only product or try to get the arrears added to their mortgage or have the number of years extended.

Borrowers are urged not to borrow more money to pay off debts as this will only lead to further financial difficulties.

Mortgage Protection Insurance can be bought cheaply this will cover problems like unemployment, accidents or sickness but must be looked into carefully as many factors can lead to non-payment of claims. Pre-existing conditions, failure to vie adequate information and self-employment are all possible reasons for non-payment and policies should be read thoroughly before signing.