Why protect your mortgage
For most households the mortgage is the biggest bill and the biggest debt. If one of you died, the person left behind could struggle to keep up the payments on a single income. Mortgage protection pays a lump sum that clears the remaining loan, so your partner and children can stay put.
You do not need a special product to do this. Mortgage protection simply means a life policy with a sum and a term set to match your loan. That makes it easy to tailor and easy to compare across insurers.
Cover that comes through a lender or an estate agent is one option among many. You can buy your policy from any provider you like, and a broker can compare a wide range of insurers for the same sum and term. Your policy also stays with you if you later move your mortgage to a different lender.
Decreasing term cover for a repayment mortgage
With a repayment mortgage, each monthly payment clears some interest and some of the loan. The balance falls over the years. Decreasing term cover follows a similar path: the sum insured starts at your loan amount and reduces each year until it reaches nothing at the end of the term.
Because the insurer's risk shrinks over time, decreasing cover usually costs less than level cover for the same starting amount. Insurers build the reducing sum on an assumed interest rate. If your mortgage rate climbs well above that figure, your balance may fall more slowly than the cover, so we check the policy's assumed rate against your deal.
- Start the sum at your current mortgage balance
- Match the term to the years left on your mortgage
- Review the cover if you remortgage, borrow more or extend the term
Level term cover for an interest-only mortgage
An interest-only mortgage works differently. Your monthly payments cover the interest, and the full loan stays outstanding until the end of the term, when you repay it from savings, investments or a sale. Decreasing cover would leave a growing gap, so level term cover makes more sense.
With level term, the payout stays the same throughout. If you have a part-and-part mortgage, with some on repayment and some on interest-only, you can split the cover into two policies or one level policy for the whole amount. We will work out which costs less for your situation.
Adding critical illness cover
Life cover pays if you die. Many families worry just as much about a serious illness that stops one partner working. You can add critical illness cover to your mortgage protection so the loan is paid off on diagnosis of a listed condition, as well as on death.
A combined plan pays once, on whichever event comes first. Adding critical illness raises the premium, and you might choose a smaller sum for it than for the life cover. Income protection is another option, as it pays a monthly sum that can cover the mortgage payment while you recover.
Single or joint mortgage protection
Couples with a joint mortgage often take a joint policy. It pays once, on the first death, which clears the loan for the surviving partner. A joint policy usually costs less than two single ones.
Two single policies each pay out separately, so the survivor would have the mortgage cleared and a second sum to fall back on later. Separate policies are also simpler if you split up. Our joint life insurance page goes into the pros and cons of each.
If only one of you earns, or one income carries most of the mortgage, you might weight the cover towards that person. There is no rule that both partners must hold the same sum. We can model a few splits so you see what each would cost.
How Hi Tomorrow helps
Tell us your mortgage type, balance, rate and term, and we will recommend cover that fits it. We compare the insurers on our panel, check the assumed interest rate on decreasing policies and explain whether a trust would help your family receive the money faster.
If you are buying your first home, we can work alongside your mortgage adviser so the cover starts on completion. You do not have to take the cover your lender or estate agent suggests. Shopping around is your right, and we make it simple.