Your home loan will typically be your largest debt, while your home is your largest asset. One way to ensure that you can keep paying your loan off and retain ownership of your home is through Mortgage Protection Insurance (MPI).
Mortgage Protection Insurance is a type of insurance where the borrower is protected in the case they can no longer repay the home loan because of certain events such as unemployment, critical illness, injury making you unable to work or death.
Mortgage Protection Insurance will help you cover your home loan repayments if these unplanned circumstances arise. By covering the mortgage if you die, it ensures your beneficiaries will be able to retain their home.
What’s the difference between Mortgage Protection Insurance and Lender’s Mortgage Insurance?
Some people may confuse Mortgage Protection Insurance and Lender’s Mortgage Insurance (LMI). The difference between the two is that Mortgage Protection Insurance protects you in the event you default on the loan.
On the other hand, your lender is protected by Lender’s Mortgage Insurance in case you default on the loan. Usually, LMI applies when you borrowed more than 80 per cent of the property price.
Do you need Mortgage Protection Insurance?
When asking yourself this question, the first thing to think about is how you plan on repaying the home loan if in case something goes wrong.
Let’s look at the advantages and disadvantages to see if you need Mortgage Protection Insurance.
- Gives you peace of mind about your mortgage repayments in case of an unexpected circumstance
- It will help you keep your home
- Most MPI providers offer premium discounts for joint policies
- Another added repayment for your mortgage
- There are limitations on the events it covers
- You might end up with an overpriced policy if your property decreases in value
How much does mortgage protect insurance cost?
The cost of Mortgage Protection Insurance will depend on the size of your loan, the repayment amount, your age, and if you hold a single or joint policy with your partner.
You can pay for mortgage protection insurance either as a lump sum payment or include it in your ongoing mortgage repayment.