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What is Mortgage Protection and Why Do I Need It?

Protecting one’s self against certain events that life throws at us is extremely important but even more so when you are purchasing a property.

Buying our first property is one of the biggest and most exciting decisions we will make in our lives. It can also be one of the most daunting. The financial commitment to make regular monthly payments to a mortgage lender and the housing association can easily become a strain, making it difficult to maintain the standard of living one's been accustomed to.

This is why protecting one’s self against certain events that life throws at us is particularly important when you are purchasing a property. We’ve asked one of our panel mortgage advisers, De Havilland Group Limited, to discuss protection options which should be considered when buying your first home.

Why you need protection

The vast majority of people will seek independent financial advice to make sure they obtain the most favourable mortgage given their circumstances but only a few will give the same level of attention to making sure they are adequately protected.

Many either choose to ignore the financial responsibility completely, thinking that “it will never happen to me” or that “my family will look after me”. There is also a misconception that the state provides adequate benefits.

Lenders only make it a condition of the mortgage that the structure is insured but they do not require that the mortgage be protected so the onus is firmly on the individual to make the decision themselves.

Lenders have a first legal charge on the property so in the event that mortgage payments fall into arrears they have the right to repossess the property.

Types of mortgage protection

There are various types of protection that can be arranged to suit individual needs and budgets.

  • Life Assurance pays a lump sum in the event of death.
  • Critical Illness pays a lump sum in the event of diagnosis of a specified illness.
  • Income Protection pays a regular income in the event of illness or disability.
  • Unemployment cover to protect payments in the event of redundancy
  • Contents Insurance to cover personal belongings

It is important to seek independent financial advice to make sure that any cover arranged is suitable and takes into consideration any pre-existing protection or benefits that are provided by your employer.