Life Insurance For Mortgages

One of the most important decisions you will make in your financial life is which mortgage you should get. For many people, the option of a fixed rate mortgage seems appealing. But what exactly is a fixed rate mortgage, and why do so many people choose this option? If you are new to mortgages then this article will let you know a little more about fixed rate mortgages and their benefits.

What does fixed rate mean?

A fixed rate mortgage is fairly straightforward, and does exactly as the name suggests. A fixed rate mortgage has an interest rate that remains the same throughout the mortgage term, meaning that your monthly repayments will remain the same, allowing for inflation of course.

Why a fixed rate mortgage?

Many people choose fixed rate mortgages because of the security and peace of mind that they provide. If you have a fixed rate mortgage, then you know your monthly repayments will not change, meaning you can budget effectively for both the short and long term. If you have a mortgage with a variable rate of interest then your payments can change depending on market fluctuations. This can leave you paying less, but often leaves you paying more each month. The best times to get fixed rate mortgages are when competition is high, and the fixed interest rate is lower than that of the tracker or variable rate mortgages.

Are there any drawbacks?

There are drawbacks to getting a fixed rate mortgage. The biggest drawback is that the interest rate is usually higher than that of variable rate mortgages. The added security comes at a price, in that you have to pay more in interest over the length of the mortgage. Also, the fixed rate is usually only fixed for a certain number of years, usually 2 or 3, after which the rate can be put up and then fixed for another period. This can mean that your mortgage will be cheap now, but in the future the rate could rise.

Who should get fixed rate?

Despite its drawbacks, there are many people that should definitely opt for fixed rate mortgages. If you are on a tight budget and have a fixed income each month, then you cannot afford for your payments to rise. Having a fixed repayment each month means that you know you can make the payment even if national interest rates rise. Also, if you can get a deal whereby the starting interest rate is lower than that of a variable rate mortgage or even the same, then opt for the fixed rate mortgage.

How to decide?

If you are still unsure about whether or not a fixed rate mortgage is right for you, then consult an independent financial advisor. They will be able to help you find the best deal, as well as tell you whether or not the base interest rate is going to fall or rise. This will determine whether a fixed or variable rate mortgage is best for you.

It’s tempting to sit back and relax once you’ve moved into your new home but hang on, have you made sure that you’re insured against all the risks that could stop you from paying your mortgage? Many things could go wrong and make it impossible for you to work, and in this article we go through each risk, and assess how important it is that you take that into account. If you are responsible for a family, then it is particularly important that you take heed of the following five issues:

What happens if interest rates increase and you can no longer afford your monthly repayments

What if you get made redundant

What happens if you become ill or have an accident and you can’t go to work

What if you have a serious accident or become critically ill, and you can never go back to work

What if you die and your family is left to cope with the outstanding mortgage

These are all questions that new homeowners have to ask, and find answers to. The good news is, the insurance industry have it covered, and there are policies out there that can provide peace of mind against all these possibilities.

On the subject of rising interest rates, you are unfortunate if you end up in the position where you can’t afford the repayments, because there are mortgages that help protect you from this. The fixed rate mortgage sets a rate for an agreed period of time in which your interest rate remains the same irrespective of the Bank of England base rate. A capped mortgage allows your payments to fluctuate, but there will be an agreed rate at which the interest rate that you pay will be capped. Capped mortgages protect you for an average of 3-5 years, and then, as with the fixed rate mortgage, it will revert to the standard variable rate.

55% of all new mortgages are fixed rate deals, so they are by far the most popular type of mortgage. The capped mortgage is less popular because it still retains an element of risk, and they can be more expensive at the outset, which deters a lot of potential customers. At the end of the protected period, for both types of mortgage, you can choose to re-mortgage with another company without paying any penalties. It’s a good idea to keep your eye on the available offers as the end of the protected period approaches, because there are likely to better deals out there. The market is so competitive that new offers are always arising, and they are particularly focused on attracting re-mortgaging customers. Ask a mortgage broker to see what else is out there, as they have all the latest information to hand. You don’t have to commit yourself to anything.

If you want to insure yourself against the possibility of losing your job, then you need Mortgage Payment Protection Insurance. However it’s important to be aware that this type of insurance is designed to protect those that are made redundant, not those that resign or are dismissed. We found quotes on the Internet for around 2.45 per 100 of monthly mortgage payment. Once you stop working, the insurance will start paying after 30 days and then for a maximum of 12 months. You can buy this insurance through your mortgage lender but we don’t recommend it, they always charge more than their internet rivals.

You also have the choice of covering your mortgage payments due to sickness or illness keeping you from working. However we recommend checking with your employer first to see if they have a sickness payment plan in place. Some companies will give their employees full pay for six months for accident or illness. Even in this case, it’s still worth getting the insurance because you could be off work for more than six months. It would be very difficult to meet the mortgage repayments on statutory sickness benefits alone. This type of insurance also costs 2.45 per 100 of monthly mortgage payment, but you can combine it with unemployment cover and it’s 3.95 per month, which is less than buying the two separately. Both will cover you for a maximum of 12 months, so you really need to consider what would happen if a serious accident or illness left you permanently unable to work.

The insurance industry estimates that 15 of men and 16 of women have to permanently leave work before retirement age because of a serious illness or accident. Think about it, if you have a heart attack at the age of 45 then you are unlikely to go back to work again. With a family to support, this could be disastrous.

In this case, then you would need Critical illness insurance it covers the outstanding mortgage in full if you are unable to work again. Look out for total and permanent disability cover it is essential that it is included in the policy as it specifically covers the possibility of you not working again due to accident.

There are a few options to look out for with Critical Illness Insurance for example you need decreasing cover if you have a repayment mortgage. This is so the value of the payout decreases in line with the value of your outstanding mortgage. It is also cheaper than the alternative: level cover. You need this if you have an interest only mortgage because the outstanding mortgage balance will remain the same.

Make sure you know all the facts about the insurance you buy, because there will be times that you can’t make a claim. For example, Critical illness Insurance requires you to survive for a period following an accident or diagnosis of a critical illness, usually 28 days but sometimes 14 days. If you die before that time, then no claim can be made on your policy.

To cover the possibility of you dying within 28 days, then you need mortgage life insurance. Many lenders require you to set up a mortgage life insurance policy as a condition of you taking out the mortgage. You don’t have to buy it through the lender however, in fact it will be a lot cheaper if you don’t. Also if you live alone and do not have to support a family, you don’t necessarily need this type of insurance as the lender will recoup the money for the outstanding mortgage by selling off the property.

Mortgage Life insurance is the most popular kind of mortgage protection, and like critical illness insurance, you can choose between decreasing cover and level cover depending on whether you have a repayment or an interest only mortgage.

There’s no denying that buying all these insurance policies to protect your mortgage will cost, but there are a few ways to get the best value. Firstly, if you combine accident and illness with unemployment cover then you will save around 20%, compared to buying them separately. Some insurance companies may refer to this as unemployment and disability cover. Critical illness and mortgage life insurance also become cheaper if you combine the two, and we predict an average saving of 20-25%.

And don’t forget the most obvious way to save money shop around. Your lender will quote you on these insurances, and may even give you the impression that you have to buy your insurance through them, but you are free to buy it from any company you please. So it had might as well be the cheapest! Go online for the best deals, even better contact a specialist life insurance broker and ask them to find the best deals for you. They can do all the legwork and, if you’re not impressed, then you don’t have to buy through them. The advantage they have on price is due to the hot competition on the Internet, especially for insurance. Brokers offer better deals by slashing their commission and giving you a further discount. Search using any of the following terms: cheap life insurance, life insurance, life insurance quotes or Mortgage Protection Insurance, and you will come across a number of cost-effective options.

The other advantage to using a broker is that you have full access to their expert advice. When faced with the option of getting a Guaranteed Premium or a Reviewable Premium for your critical illness insurance, will you know what it means? Even if you do, which one is best? That’s when a life insurance adviser is worth their weight in gold. So we recommend picking up the phone and talking to an expert in person, it doesn’t take long and it guarantees you getting it right first time.

The bottom line: peace of mind comes at a price but it doesn’t have to be expensive!

One of the most important aspects of buying a property is the mortgage interest rate that you can obtain. After all your looking to borrow the amount required for your property for the lowest possible cost.

Standard variable rate is the typical rate of interest that lenders use and it is generally the most expensive option for the borrower. The standard variable rate is the rate of interest decided by the lender which maybe loosely connected to the Bank of England base rate by a margin normally around 2%.
If you are on a standard variable rate then you may notice that some lenders like to involve any rate increases with effect straight away. At any rate the standard variable rate is not the cheapest option available (based on circumstance). As a independent broker we can help you take advantage of any cut-price offers from other lenders.

A fixed rate is exactly as its called, the rate of interest is fixed over a certain period of time, generally between 1-5 years. Fixed rate mortgages are generally easier to manage since youll know how much is needed for the monthly repayments on your mortgage. The fixed rate mortgage is ideal for people who maybe under financial stress and need to know where they stand from cheque to pay cheque. Fixed rate mortgages are also suitable if interest are set to rise in the early years of a mortgage. Be aware that mortgage providers are usually one step ahead to adjust fixed rates accordingly. A Fixed rate mortgage means you could end up stuck with paying more then others if the interest rates fall below the figure youve adjusted yours to.

Discount rates are a percentage of the lenders variable rate, so your repayments will rise and fall in accordance with the lenders normal rate but you will be paying at a reduced rate over an according time period. This is ideal for first time buyers as a discounted mortgage can give you a few years of breathing space. A 1 -2% discount is very good if there is no lock in period afterwards, with the benefits of this come the ability to remortgage with another lender when the discount rate period draws to an end. Unfortunately you may often find you are locked in for another couple of years on the variable rate so you will not be able to get out of this sort of deal unless you are prepared to face huge redemption penalties. Discount mortgages offer good value for money – but only if there is no lock-in period once the discount has come to an end.

A capped rate will put a barrier to your interest rate you will pay over a certain period of time. If the lenders variable rate exceeds the capped rate then it is here you will benefit, but if the interest rate falls below the capped rate then you will paying the same as many others.
Capped rates will tie you into a mortgage for a certain period of time, usually between 1 and 5 years although recently there has been an introduction of capped mortgages for 25 year periods.
Capped rates give you a mix of advantages of the fixed rates and variable rates, again something is expected in return for this, the capped rate is likely to be higher than any fixed rate you can get. Like fixed rates the capped rate will make financial sense for those who are financially stricken.

Tracker rates tend to follow the Bank of Englands interest rate with a margin either above or below the rate, this is decided by the lender.
How will the interest be charged? Ignoring the type of interest rate you decide to go with one vital question to ask is how frequently is the interested calculated. If you decide to go for a mortgage where the interest is calculated daily then you will find yourself paying less interest over a period of time because every payment will reduce the amount you owe. Current account and flexible mortgages charge interest day by day. If interest is calculated monthly you could end up paying more and you can end up waiting a month after a payment is made before the interest is recalculated. But some lenders have their foot in the door by calculating the interest payable on the amount due at the start of the year and this could make a significant difference to the amount of capital reduction over 12 months. It also means that if you make an additional payment to reduce your mortgage it could be up to a year before this reduces the amount of interest you are charged.

You can compare mortgages by looking at the amount you need to pay every month. Dont be fooled by latest headline rates as they can be misleading as we know different companies charge different interest rates in different ways. The ideal target is a competitive interest rate that carries no redemption penalties so that it is cheaper to move your mortgage elsewhere if more attractive mortgages become available.

By law mortgage providers have to provide an Annual Percentage Rate (APR) for their products. It illustrates the true underlying interest rate, including all the charges, over the entire term of the loan. This means it adjusts for things such as annually charged interest. Comparing the APR of one loan against another can also help you get a better feel for which is the most competitive.

Buying a home is an exciting prospect. Choosing the location, the floor plan and finally closing the deal. There is an important element that exists in most home sales and that is the mortgage.

One would need to get financing to purchase a property in full cash price.This type of financing is a mortgage. When you take out a mortgage you are using the property as collateral. If you fail to repay the mortgage on the terms you agreed to, the bank or lending company has the right to take over possession of your property. Therefore its very important to choose a mortgage that will fit into your budget.

There are several types of mortgages available today. One of these is the fixed rate mortgage.

When you take out a fixed rate mortgage it means that you are taking out a mortgage for a specific amount of time, It can be a 10, 15, 20 or 30 years period. When you apply for the mortgage loan, you agree to an interest rate. This interest rate will be in activated for the life of your mortgage and monthly payments will be set accordingly to the terms agreed upon with the lender.

Another type of mortgage is the adjustable rate mortgage where the interest rate applies for a shorter period of time. Once completed, usually a year, the interest rate in effect at that particular time is applied to the mortgage.

If interest rates are volatile when you are considering purchasing a home, it is advisable to consider an adjustable rate mortgage. The reason is that if you commit yourself into a fixed rate mortgage and then interest rates fall, youll be paying much more than you would have otherwise.

When you go to apply for a mortgage the loan officer will explain in detail the differences between the two kinds of mortgage. They will also advise you as to which one is better for you in terms of your financial goals.

If you are already a homeowner and are of an elderly, there is another type of mortgage that applies to you. Its called a reverse mortgage. A reverse mortgage is when the homeowner wants to enjoy some of the equity they have already acquired in their home. Each month the homeowner is paid any amount of money. This money is charged interest. Once the homeowner passes away or sells the property, the bank takes the total of the reverse mortgage payments and any additional interest out of the proceeds of the homes sale.

This works very well for retired people who want to enjoy the rest of their live without having to worry about money and still able to live in their homes and at the same time, the reverse mortgage gives them the extra cash funds they wouldnt have otherwise.