A mortgage protection plan is designed to pay off your mortgage in full should you die prematurely during the term of the policy.
It's decreasing term life insurance, and suited to people with repayment mortgages. Decreasing term means the sum assured (ie the payout) reduces over the mortgage term in line with the outstanding mortgage balance.
Joint borrowers can take out a policy which will payout on first death to clear the mortgage for the survivor.
Level term insurance is ideally suited to borrowers with interest-only mortgages.
It pays the fixed sum assured, usually set at the same amount as the original mortgage loan. Should the policyholder die at any point during the term, it ensures the mortgage can be paid off in full.
Critical Illness Insurance pays a tax-free lump sum should the insured person be diagnosed with a severe illness like cancer, heart attack or stroke.
It will often cover other severe medical conditions. For example, loss of a limb, Parkinson's disease, Motor Neurone disease or blindness. It can be bolted on for an additional premium to a mortgage protection or level term insurance policy or bought as a standalone product.
Income Protection is widely used by the self-employed. It provides a monthly tax-free income should illness or injury prevent the policyholder from working.
Most policies pay 50-65% of pre-illness income until the policyholder returns to work, retires or dies. Payments are deferred for a pre-determined period between four weeks and a year after the injury or diagnosis. The longer the deferment period, the lower the premium.
Buildings insurance is mandatory for anyone taking out a mortgage, as it provides protection of the lender's security. It also means that if, for example, fire destroyed your home, the Buildings insurance policy would cover the costs of rebuilding or reinstating the home to it's previous condition.
Contents insurance protects the homeowner against the same events damaging or destroying their household contents.
Usually, Buildings and Contents insurance is sold as a combined policy but either can be bought on their own.
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Your home may be repossessed if you do not keep up repayments on your mortgage.
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A broker fee is only payable after you've received a formal mortgage offer from a lender. The fee will depend on the complexity of your case and the amount of work required to source your mortgage deal.
Your advisor will inform you of the fee in advance, once he's checked your credit file, gathered all relevant info and provided you with a decision in principle. There's no obligation at this point, and you can walk away without paying a penny if you wish.
As your broker, no. However, we will need to see your credit report before we can source the most suitable deal and apply for a decision in principle (DIP).
The lender will carry out a hard credit search, either at the Decision in Principle stage, or when making the full mortgage application (FMA). The latter tends to be more common.