What would you do if you became unable to keep up with your mortgage payments? Would you find yourself facing the prospect of losing your home – or do you feel you’re adequately protected?
It might be something that most people don’t expect to happen to them, but every year many homeowners become unexpectedly unemployed or ill, preventing them from meeting their mortgage payments and other commitments. And unless you have something to fall back on, your home could be repossessed and sold if you can’t keep up with your mortgage payments.
One of the best ways to protect yourself can be by taking out a mortgage protection insurance policy (also known as mortgage payment insurance, or MPPI). In the event that you can’t cover your mortgage payments (through no fault of your own), a mortgage protection policy can help you to cover your costs – and help you stay in your home.
Without this cover, you could effectively be left with a very large debt (i.e. your mortgage) that you can’t afford to repay if you run into problems. Some people in this situation end up getting into further debt problems by using their credit cards or other forms of credit to make their mortgage payments.
How mortgage protection insurance works
If you become unable to afford your mortgage payments for any of the reasons detailed in your policy terms (e.g. involuntary unemployment, sickness or accident), your mortgage payment insurance policy can pay out a monthly sum to help you cover your mortgage payments.
You’d need to think ahead when you’re taking out your policy – you might decide you’d need 70% of your mortgage payments paid, or 100%, or even 125% (to help with other costs too). This could be very useful if you share your finances with someone else (e.g. your partner) and don’t need cover for 100% of your monthly payments.
Can it help with other debts?
As we’ve explained, it may be possible to get cover for more than 100% of your mortgage payments, to help you deal with other living costs. However, this might still not be adequate for all your outgoings – you may decide it’s worth putting money into a savings account every month as well, for example, to make sure you’re as prepared as possible.
The help an MPPI policy will provide will only last for a certain amount of time (e.g. 12 months). If you’re still struggling and worried about debts after this point, you should get advice from a debt expert as soon as you can.