|
||
If you are concerned about how you would be able to pay your mortgage and loan repayments if you should become unemployed then you need to give some thought to taking out a payment protection policy. There are different types that will provide redundancy protection and can make your life a lot easier while you search around for work.
The biggest monthly outgoing that the majority of us have to be able to maintain each month is the mortgage. If you cannot keep up with this payment then the chances of losing your home are great. The lender will send a letter if you miss just one payment. If you miss another and do not contact them and cannot come to an agreement to continue paying on time and catch up on the arrears, then repossession will be just a matter of weeks away. You can ensure that you would not have to worry about anything like this if you take out either mortgage payment protection as redundancy insurance or income payment protection.
Mortgage cover as redundancy protection would do just what the name suggests. It would allow you to insure your mortgage payment up to so much and then this would be the tax-free sum that you would get back if and when you needed to put in a claim. If you go with a provider that offers age based premiums then the younger you are the bigger savings you will be able to make on the premiums and in some cases you would be able to get your premiums for up to 40% less. Mortgage cover is usually offered when taking the borrowing with the lender. However premiums are know to be high if you take it added onto the policy.
Income payment protection can be taken to insure not only your mortgage but also any other essential outgoings such as loan repayments or credit card repayments. It also covers outgoings such as grocery, heat and light which are needed for the family to be able to function and maintain their current lifestyle. You are able to take cover for up to a certain amount of your income and then fall back on the payment. If you just needed to cover loan and credit card repayments then you could look at loan payment protection. This would just provide you with the income you paid out in loan repayments each month and would be enough to stop you from getting into debt.
Your redundancy protection would start to payout from between the 30th and the 90th day of you being unemployed and some providers backdate to the first day of you becoming unemployed. Following this you would receive an income each month for between 12 and 24 months which is usually enough to have found work again. However despite the fact of whether you were back in work or not after this period, the policy would cease. Checking the exclusions that all providers add-into their cover is imperative as this will determine whether cover would be suitable. Providing you take the information that all ethical payment protection specialists supply and compare it, then you will have something to use as a safety net if you should become one of the statistics of redundancy.
Fixed mortgage loans
Fixed mortgage rate loans are the most popular type of home loan. With this type of loan you will know upfront what your monthly payment will be for the life of your loan.
The 30 year fixed rate loan is probably the most common loan selected by home buyers because the loan is spread over a longer span of time which reduces the monthly payment required each month. However, it increases the amount you have to pay over time due to interest as opposed to a shorter term loan.
The 15 year fixed rate loan allows you to pay off your home if fifteen years and is a popular choice for home buyers that can afford a higher monthly payment. You will only pay half the interest you would otherwise pay with a 30 year loan.
Biweekly loans are usually tied in with a 30 year fixed rate loan. Payments are made every two weeks instead of monthly. This lowers the amount of interest you have to pay and means your home will be paid off a few years sooner.
Adjustable rate loans
The adjustable rate mortgage can be tricky for those that don't understand how it works or are on a tight budget. The amount you pay each month depends on the current interest rate. Therefore it is possible your payments will increase as time goes on.
Convertible loans
This type of loan allows you to switch from a fixed rate loan to an adjustable loan or vice versa. This gives you flexibility in the years ahead to switch your loan type to get the lowest interest rates and lowest house payments.
Interest only loan
If you work on commission or receive a big bonus each year as part of your salary, you may be interested in an interest only loan. With this type of loan, you just make the interest payments each month until you get your bonus, and then you make a lump sum payment on your mortgage.
Balloon loan
A balloon loan is a fixed rate loan that has small monthly payments which span around seven years. Then at the end of seven years you must pay off the loan in a lump sum payment or refinance the loan.
Reverse mortgage
A reverse mortgage is for those with a lot of equity built up in their home. The loan requires no mouthy payment, however the loan needs to be paid off if you sell your house.
FHA mortgage
This type of mortgage loan is a good match for first time home buyers and those with little money for a down payment. FHA loans require a smaller down payment than conventional loans and the monthly payments are also less.
Veterans loan
Veterans loans are only for those who have served in the armed forces and their survivors. No down payment is required for this type of loan.
You can see there are quite a few choices to mull over. The best idea is to consult with your realtor, financial advisor, or other professional to help guide you through the types of loans available and how to choose the one best for you.