Our home is often our biggest financial assets, as well as our greatest source of debt. With most home loans having a term of 30 years, when you take out a home loan, you are expected to pay off this most significant financial outlay during your life.

But what would happen if you were suddenly unable to make loan payments due to loss of employment, or a serious illness? Luckily most lenders offer mortgage protection insurance, which allows customers to rest at ease knowing their repayments are protected against the unexpected.

So what is Mortgage Protection Insurance?

Mortgage protection insurance is a type of insurance homeowners can take out when they take out a home loan. It covers the cost of the monthly repayments if the borrower ever defaults on their loan due to illness, injury or pass away. It can be taken out on both residential and commercial properties.

The following factors can all influence the mortgage insurance premium:

–   Whether or not you take out a single or joint policy

–   The size of the loan

–   Your age at the policy commencement date is factored into the calculation of your premium

–   Your premium will be influenced by the size of your repayments

Unlike Lenders Mortgage Insurance (LMI), which is a policy a lending institution takes out to insure itself against the risk of not recovering the full loan amount should a borrower defaults, mortgage protection insurance protects you.

Like any insurance policy, you’re trying to limit the financial impact on your family if something were to happen to you. For homeowners, having this peace of mind is the big benefit that comes with having mortgage protection insurance.

However, it’s important to note that your policy only pays out once. This means your dependents will only receive a single benefit when they go to claim. Additionally, it is far less flexible than income protection for example. Mortgage protection insurance covers fewer events and offers a few additional features than income protection.

It is clear to see that Mortgage Protection Insurance has its benefits, however, whilst it would be fantastic to cover yourself with insurance for every potential risk, affordability limits this significantly. A good advisor will sit down with you and tailor the type of cover to be most suitable to your family’s budget and priorities.

At Richman Home Loans, it is our mission to educate and inform you with the knowledge needed to effectively grow your investment property portfolio. Give us a call, at 1800 __ and take advantage of our complimentary phone consultation.