Mortgage protection is an extra cost a lender will add to your mortgage which insures you for certain times when you might not be able to pay. Whether to opt for protection is a big decision as it might influence whether your house is repossessed if you have unexpected financial trouble in the future, so you need to make sure you consider all the pros and cons. Here are some mistakes not to make when deciding whether or not to pay for mortgage protection.
Thinking mortgage protection is mandatory
While your mortgage provider may explain mortgage protection to you and you might even be advised to take it on, you should understand that the protection is optional and you are not under any obligation to use it. If you are completely confident that you will not struggle to pay your mortgage under any circumstances then mortgage protection might just turn out to be an added unwanted cost, when you could spend your money on something more worthwhile.
Being too optimistic
While most of us don’t expect to be made redundant or become suddenly ill, particularly at the time of taking on a mortgage, it can pay to plan for these types of unforeseen circumstances. Having your home repossessed is such a distressing experience for all involved, so you must think realistically about the potential for problems later on and make a decision based on this risk verses the cost of the protection.
Failing to compare offers
You will probably be offered mortgage protection by your mortgage provider, and this may seem like a simple way to choose. But by researching the market you are likely to find a much better deal which allows you to be covered for redundancy or illness at a cheaper rate. Keep an open mind until you know what other offers are on the market.
Thinking that mortgage protection will cover you in all circumstances
Many people take on mortgage protection because they have not understood the terms and conditions and therefore think that they will be covered in every situation of financial difficulty. In fact, the protection normally only covers homeowners who are made redundant or become ill and therefore no longer receive their main income. Therefore, if you are affected by other financial issues such as rising lifestyle costs, debts or overspending, your protection will not help you. Whether or not you take on mortgage protection, you need to ensure you will be able to pay your monthly mortgage repayments under normal circumstances before entering into a mortgage agreement.
Failing to consult everyone involved
Taking on a mortgage is likely to affect people other than yourself, and they should be involved in arrangements so they know what will happen if difficult circumstances should arise later on. Those living in the house, and anyone you might ask for help should financial difficulties arise, should understand your plans. This will make it easier in to discuss what any financial problems might mean for you and your family.