Watch out for the hard sell
Some lenders and brokers try to make more money elsewhere in the mortgage process. So be prepared for the hard sell on these products.
Mortgage payment protection insurance (MPPI)
Sometimes called accident, sickness and unemployment insurance (ASU), MPPI is supposed to cover your payments if you have an accident, become ill, or you're made redundant.
You can get limited help from the Government in these circumstances but, at best, it will only cover your interest. So it's sensible to consider, before you take out a mortgage, how you would manage to meet your repayments if these events happened.
MPPI isn't a bad policy but it can be quite pricey and has been mis-sold in the past to people who couldn't actually claim on it. This can happen because the insurer doesn't carry out any checks when you first apply, only when you go to make a claim.
Be extra careful if you are self-employed, have any reason to suspect you might be made redundant or have any existing medical conditions.
What to ask before taking out MPPI
If you do decide to take out an MPPI policy, check carefully:
That it will pay out if you claim
When it will pay (you may have to wait several weeks before the policy kicks in)
How much it'll pay and for how long (it usually only covers your repayments for 12 months)
Ensure you understand all the terms and conditions before signing on the dotted line.
Buying MPPI from your mortgage broker. Be careful when buying from your mortgage broker here. It may not be able to get you the best-priced policy. It's common for a broker to offer whole of market mortgage advice, but then be tied to a single, or small panel of insurers.
There's no harm in getting a quote from your broker for MPPI, but make sure that you compare with other policies to see if it's a good deal.
Bundled buildings / contents insurance
All lenders will insist you take out buildings insurance. But be very suspicious of deals which insist you buy your buildings insurance through your lender. While the amount quoted may seem reasonable in the first year, you're then trapped into accepting whatever premium increases they foist on you in subsequent years, for as long as the mortgage lasts.
Some lenders charge around ￡30 if you decline to take their insurance. If you go elsewhere for your home cover, some seriously cheap deals are possible. By using cashback sites, some people have even been PAID to take out insurance. See our Home Insurance guide.
Life cover from your mortgage seller
Would you ask the man who sold you a computer to be your fashion stylist? No, so don't assume just because someone sold you one financial product, they'll automatically get you a good deal on extra bits such as life cover or other insurance.
Buying your first home is probably the first time you've thought about life insurance, but don't rush in and grab the first one offered to you. In some cases you can save 50% on the life cover sold by your lender or broker.
Call me for full information on how to find the cheapest cover, and receive a Life Insurance and Mortgage life insurance guides.
#MrMoneySmart #ToniHughes #Mortgage