When you take out a mortgage, the lender who gives you the money will want to know that they can get it back if you are unable to keep up on your repayments. They do this by putting what is called a “legal charge” over the property when you buy it. This means that if you stop paying, they can legally take the property back, sell it, and get their money back.
But often, people do not just choose to stop paying back their mortgage. There is usually a reason why. And when it comes to the potential of losing your home, it is important to understand the risks and their solutions before signing up to a mortgage.
- Being too sick or injured to work
Losing your income because you are off work due to a long-term sickness or an accident can only add to the pressure of recovery. And not being able to pay your mortgage puts the very place you may be recovering in at risk. A specific type of insurance called Income Protection is designed to provide a monthly income in case this happens so you can pay your mortgage, buy food, and pay other essential bills whilst you recover.
- Becoming Critically Ill
Unfortunately, for some people being diagnosed with a Critical Illness is a reality many of us do not want to face. But if it does happen to you, there are products that can pay out cash lump sums that you can use to reduce or even clear your mortgage. You’ll pay a small premium each month and when your diagnosis is confirmed, you’ll not only get cash, but lots of additional support from your provider to ensure you get the best possible treatment.
In the event of the worst happening, it can be comforting to know that the home you live in will be kept safe for your family to continue living in. A Life Insurance policy does just this. It is an insurance policy that will pay out and agreed amount when the names person dies. These can be taken out either jointly with the person you have bought the house with, or separately. There are various ways of establishing a life insurance policy from how much is covered, if the premiums are fixed or varied, and where the money goes when you die, such as into a trust. Your adviser will talk you through all your options.
No one wants to think of the worst happening. But complications such as those listed above are a part of life and no one is guaranteed to be immune from any of them. But we can make sure that IF it happens, you home is safe either for you or your loved ones.
Talking about these situations is an important part of receiving financial advice. Our advisers have a moral obligation to understand all options available to you.