Guide to Mortgage Payment Protection Insurance
MPPI covers a combination of insurances. You may simply want the unemployment cover for your mortgage if you already have accident and sickness insurance at work, for example.
While about 60% of new mortgage borrowers take out MPPI, only one-third of all borrowers have this insurance. This may simply be because the cover is not particularly cheap – many lenders charge around £5 per £100 of mortgage payment you wish to insure each month. But note that you may be able to find cheaper MPPI if you shop around. And some mortgage deals come with free MPPI, either for six months or a year.
Note that if you remortgage at any point and increase the size of your mortgage, you will also need to increase the level of MPPI cover.
You can take out mortgage payment protection insurance direct over the internet, but some financial advisers claim they can offer this insurance more cheaply because of their bulk-buying arrangements. Some mortgage deals come with free MPPI for the first six months or the first year, but you must remember to renew the policy or take out another one at the end of the free period.
State help with your mortgage payments
In January 2009, the Government introduced a temporary measure that reduced the time you have to wait for state benefits to cover your monthly mortgage interest, known as Support for Mortgage Interest (SMI). In the past this was nine months, but it has been slashed to 13 weeks.
Nevertheless, there are rules for eligibility (an upper limit of £200,000 and SMI only pays mortgage interest up to a rate of 3.63%) and you will be means-tested (you can’t work for more than 16 hours a week and have more than £16,000 in savings).So, if you have a partner who earns enough to cover the mortgage interest or you have savings, you will not be entitled to state help. Also, this help will not be available if you have a mortgage protection policy in place which would do a similar job.