Mortgage Insurance
What is Higher Lending Charge MIG Mortgage Insurance?
These are really all terms for the same thing but the current correct term to use is Higher Lending Charge and this is one of the imposed by the lender if you borrow more than a property. Not all lenders charge it but where they do charge it, it is normally for mortgages in excess of property. The lenders who don't charge it will typically charge you higher interest rate instead but some lenders who do charge it also charge you a higher interest rate as well as imposing a higher lending charge. So in general, you should try and avoid paying a higher lending charge although there can be cases where it is worthwhile but as a good general rule avoid mortgages where you have to pay a higher lending charge.
What is compulsory insurance and do I have to get it?
Well if you take a mortgage out with the lender of the house, compulsory insurance, is something by definition that you have to get. However, frankly, most lenders these days don't have deals which include compulsory insurance, so it's very easy to avoid it. It refers only to builder's and contents insurance, and the key reason why you would want to avoid a mortgage that had compulsory insurance is that you will have no choice for the builder's and contents insurance and therefore you will normally be paying over the top. However, compulsory insurance has largely fallen into disrepute and so it is actually quite rare these days to find a mortgage which does require you to take the builder's insurance out with the lender. Having said that, lenders will often try to sell you their expensive building insurance, so just as you should shop around for your mortgage, you should shop around for your builder's insurance and your contents insurance.
Should I buy insurance from my mortgage lender?
It's normally a bad idea to buy insurance from your mortgage lender because they normally will only offer insurance from a single company, and it's highly unlikely that's going to be the most competitive in the market. It may well be that your mortgage broker can offer you competitive insurance, but you should shop around for your building insurance and your contents insurance. It may be that a combined building and contents insurance policy is best. It may be that it's best to do it separately. But you should get insurance quotes from either your mortgage broker or a separate insurance broker.
How can I cover myself in the event that I can't make my mortgage repayments?
Well, the key things one needs to consider are not being able to make the mortgage payments because you can't work due to being ill or due to an accident, or not being able to make the mortgage payments because you're dead. Obviously, you need different types of insurance for that, and it is possible to get insurance to cover all those eventualities.
How will Life Assurance (Life Insurance) protect my mortgage repayments?
Well, life insurance is designed to provide a lump sum on your death, and one of the key reasons for having that insurance is to enable the mortgage to be paid off should you die while the mortgage is still in place. The insurance company will pay a lump sum to your executors, and that money can then be used to pay off the mortgage. Clearly, if you've reduced the mortgage or paid it off at that stage, then the money from the life insurance can be used for other purposes.
What is Level Term Assurance?
Level term assurance means that the amount paid out by the insurance company in the event of your death remains exactly the same throughout the whole policy term. It's the sort of insurance you will have if you have an interest-only mortgage. It can, however, also be useful for a repayment mortgage, because even though the balance on your mortgage will reduce over the course of the mortgage, the additional amount that will be paid out by the insurance is bound to be useful for other things. The additional cost of a level-term assurance over other types is often quite small.
What is Decreasing Term Assurance?
Decreasing Term Assurance is a life insurance policy where the amount that the insurance company pays out on your death reduces steadily year by year, and indeed perhaps month by month, to reflect the fact that Decreasing Term Assurance is designed to cover your mortgage, and if you have a repayment mortgage, then the balance outstanding on your mortgage steadily reduces.
What is Accident Sickness and Unemployment Mortgage Payment Protection Insurance (ASU MPPI)?
Accident Sickness and Unemployment Insurance or Mortgage Payment Protection Insurance, which in two words are the same thing, is designed to allow you to make your mortgage payments in the event that you can't work due to an accident, sickness, or unemployment. You would normally pay a monthly premium to the insurance company, although it is possible to pay a single premium for a number of years, but generally, I'd advise against that. That monthly premium will then provide you with cover, typically for up to a year, in the event that you can't work for any of the insured reasons. In most cases, you won't receive any payment from the insurance company for the first month, and in some cases, for the first two months. Then, they will make payments (usually for a year, sometimes for two years) which are designed to help you to make the mortgage payments; indeed, you can insure for a little more than the mortgage payments to cover other payments, such as burial insurance and life insurance.
