Leading non-bank lender Resi Mortgage Corporation says mortgage related insurances are set to become more popular this year as repayments rise and mortgage holders seek to protect their financial ability to keep their property.
Resi's Head of Consumer Advocacy, Lisa Montgomery, says the current rate climate is likely to jolt some borrowers into action to investigate what protection they can put into place, if the ability to pay their mortgage is affected by an event.
She says: "The value of having home and contents insurance is already well known but if a borrower can't continue to pay their mortgage on that property for any period of time, that policy is not much use as they may be forced to sell the very asset they have that policy in place for."
Montgomery says many borrowers are blissfully unaware of the risk posed to their home if they are rendered incapable of meeting their mortgage repayments because of sickness, prolonged illness, injury or death.
She says: "In short, if they cannot meet their mortgage repayments and they exhaust the hardship provisions of the lender, selling the property may be their only option - unless they have mortgage protection insurance in place."
She says: "Unfortunately when some borrowers first sign up for a home loan, they mistakenly hear the words Lenders' Mortgage Insurance and assume that it protects the borrower if they are unable to meet their repayments. But there are in fact two types of insurance related to mortgages - one is mortgage protection for the borrower, whilst LMI protects the lender in case the borrower defaults on their loan."
Montgomery says mortgage protection policies available today can offer various combinations of income protection and life insurance, paying out the borrower's outstanding mortgage amount in the event of permanent disability or death; or continuing regular mortgage repayments for borrowers who may be injured or sick for a prolonged period until they recuperate.
She says: "And with mortgages routinely taken out over twenty years, it's likely that at some point during that time a borrower may be faced with a life-changing event which can instantly impact on their ability to meet their mortgage repayments - so it's wise to consider taking out this insurance in order to avoid the extreme repercussion of losing your home."
Montgomery says with property investors also set to pay more for their loans this year they should also investigate insurances specifically related to renting out a property, such as Landlord Insurance.
She says: "Outside of being covered by the limits of a bond paid by the tenant, Landlord Insurance can cover the landlord for loss or damage to their building and contents, or loss of rent or rental default by a tenant."
Montgomery explains that mounting pressure on household budgets will lead people to review their insurances, including those related to home and contents, car and health.
"So when this is being done it's important to get the right cover for your particular circumstances, by not paying for benefits you won't use and by not doubling up on life policies that may be attached to your existing superannuation arrangements," she says.
Montgomery cautions borrowers to read any policy fine print regarding pre-existing medical conditions and exactly what benefits are associated with various illnesses before making a final and considered decision.
For more information on how to get the most competitive loan and the highest quality service, give Resi Home Loans a call today on 136 126.
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