How to Protect Your Mortgage and Your Home

By Vicki Coleman

Some people spend an inordinate amount of time preening their homes, while others are just happy to have four walls that they can call their own. Whichever group you fall into, you’ll want some peace of mind that you’re not going to have your pad cruelly prized from your clutches at any point.

As we’ve seen recently, you can live and work an honest life and yet external factors can still conspire against you and threaten to make your mortgage unaffordable, meaning you potentially lose your house.

In a recent survey of 2,000 homeowners[1], 25% of borrowers think it is somewhat unlikely or very unlikely that they will be able to afford their payments were interest rates to hit 5%. A further 13% said they didn’t know whether they would be able to pay their mortgage in this scenario.

It’s every homeowner’s biggest fear. The question is, can you do anything to protect your mortgage and your home? The answer, thankfully, is yes – let’s look at your options.

Home insurance

If you’re a homeowner – or about to become one – you’ve probably already got a good idea of what home insurance is all about. Your mortgage provider might’ve even insisted that you have buildings insurance in place to start the loan agreement.

Yet, research shows[2] that out of the 22.6 million homes in Britain, around six million don’t have any form of home insurance in place, equating to one in four properties.

With the average value of home contents in the excess of £35,000, properties being the biggest investments people make in their lives, and premiums for buildings and contents cover starting from as little as £20 per month, it stands to reason, taking out home insurance is a sensible precaution.

What’s typically covered?

●      Fire damage

●      Flooding and storm damage

●      Burst pipes

●      Falling trees/branches, aerials or satellite equipment

●      Subsidence

●      Vandalism and theft

Income protection

Most homeowners are reliant on their salary to cover their mortgage repayments. If circumstances were to come to pass that meant you were out of work for a period of time, what would that mean for your mortgage?

Falling behind on mortgage payments by 90 days will usually mean you have defaulted on the loan, meaning your lender can begin repossession actions. This can lead to eviction, so for some homeowners, they want to put a safety net in place so they don’t find themselves in this precarious position.

Income protection is a type of insurance designed to help you continue to meet your regular financial commitments if you are unable to work for an extended period of time.

It provides a monthly income, tax-free, if you are forced to stop work for health reasons. While income protection won’t cover all of your salary – typically payouts are 50%-70% of earnings – it might be enough to ensure you can keep up with your mortgage repayments.

If you want to guarantee your mortgage will be covered, you may want to consider mortgage protection insurance which helps to pay your monthly mortgage repayments if you can’t work due to illness, a serious injury or redundancy.

Life insurance

Over the course of your life, most of your money will probably be spent on your home. And yet, many homeowners don’t put the cover in place to ensure their home stays within their family’s possession should they die.

Two-fifths of homeowners[3] have not yet taken out a policy to protect their property in the event of their death. Death may seem like a far-off event – and, thankfully, for most people under the age of 50, it is – but none of us have a crystal ball.

“Prepare for the worst, hope for the best” is an apt phrase as far as life insurance is concerned. With a bit of luck, your policy will just be renewed until a ripe old age (or when your policy expires).

But, if your life is cut short for any reason, a life insurance policy can help:

●      Make sure outstanding debt like a mortgage is manageable.

●      Minimise stress during an already difficult time.

●      Let your family maintain their lifestyle.

With your house in mind specifically, a decreasing term policy provides cover for the length of your mortgage, with the payout tapering off over time to reflect the outstanding debt.

What if the house is mortgage-free by the time of your death?

If you’re the owner of your property, having paid off your mortgage, you obviously don’t have to worry about leaving enough money behind so that your family can continue to pay for it.

However, you do still need to get your affairs in order to ensure that the property goes to the right person after your death. If you jointly own your home with a partner or another family member, they will automatically inherit the property.

But if you’re the sole owner of your house, who it’s passed to will be dictated by your will.

When someone writes a will, they name executors, who are the people they want to administer their estate after their death. They can also choose who should benefit from their estate after their death – these are their beneficiaries.

So, if there is a will, it's the executors who must apply for probate. Once the Grant of Probate has been issued, it's the executor's job to continue with the administration of the estate.

According to research[4], less than half of adults in the UK have written a will. There’s no time like the present – it could ensure your home is kept within the family.

Take out protection on your home today

If you like the idea of protecting your home with either income protection or life insurance (or both), generate some quotes with QuoteSearch to better understand the cost of cover.

Even if you don’t follow through on a quote, your information will be securely stored, and is never shared without your permission.

To compare your free quotes from leading providers, click here.

[1] https://www.mortgagestrategy.co.uk/news/quarter-of-borrowers-unable-to-afford-their-mortgage-if-interest-rates-hit-5-survey-finds/

[2] https://www.finder.com/uk/home-insurance-statistics

[3] https://www.actuarialpost.co.uk/article/two-fifths-of-homeowners-are-not-taking-out-life-insurance-20452.htm

[4] https://todayswillsandprobate.co.uk/less-half-uk-adults-will/