Mortgage blog: The easy way to avoid one of life’s biggest financial mistakes
Is your mortgage protected? If not, you are not alone. A recent survey has found that less than 3% of new mortgage borrowers elect to buy unemployment cover when they take out their home loan while millions of Brits don't have any life or illness insurance to cover their home loan.
2011 figures revealed that four out of ten UK mortgage holders have no life insurance protection for their mortgage. So, what would you do if your partner or spouse died or if you lost your job? We look at the latest research.
Just 3% of mortgage holders have unemployment cover
A 2011 survey from Sainsbury's found that one in three 35-44 year olds, the age range most likely to have dependents, do not have life cover to protect their mortgage. Now, a new poll from British Money has revealed that just 2.7% of new mortgage borrowers buy unemployment cover.
Simon Burgess, director of the company who commissioned the research, believes that lenders are partly to blame with the survey revealing that nearly half of mortgage lenders are failing to offer unemployment cover as an option.
When asked why they didn't buy unemployment protection, 46% of new mortgage borrowers said that it was not discussed or offered to them by their lender so they didn't know it was available. Just over a quarter (27%) thought it unnecessary as the State would protect them if they lost their job and 24% said they would never buy the product as it has a tarnished reputation. The remaining 3% purchased cover - in line with previous survey findings.
Mr Burgess said: "These figures are astounding - why are so many mortgage lenders shying away from offering the very products that will prevent customers from amassing debts and enable them to keep their homes during times of hardship? It doesn't make sense - lenders are asking borrowers to jump through hoops to evidence they can meet their financial commitments before offering a mortgage but are not offering support mechanisms when they can't."
Could your dependents pay your mortgage if you died?
The Sainsbury's study, based on responses from 719 mortgage holders, suggests seven million people could leave behind £245bn of unpaid mortgages in the event of their death, leaving dependents with the financial hardship of meeting monthly repayments or face downsizing to cope.
Keith Osborne, editor of whathouse.com, says: "If you have a mortgage then it is generally a good idea to ensure you have sufficient life cover so that your home loan could be repaid in the event of your death. If you have financial dependents then it may also pay to consider other types of protection including critical illness cover and unemployment cover. Speak to a professional who can give you advice on the right cover for you."
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