Mortgage payment protection insurance (MPPI) - What is it?
There has been a fair bit of bad press on mortgage payment protection over the last few years, so i will try and clarify this for you and help you save some money along the way. MPPI is often missold to homebuyers and can cost you hundreds of pounds a year!
What exactly is Mortgage payment protection insurance (MPPI)?
Mortgage payment protection insurance (or MPPI for short) is a way in which you can guarantee you payments are
MPPI is often mis-sold to mortgage applicants
made to your mortgage provider if for some reason you can’t meet the payments for that month. The insurance is like a safety net for you to fall back on, if for example, you lost your job, become ill for a long period of time or fell under other circumstances which affect your financial situation.
The mortgage protection is not a pre-requisite for actually being accepted for the loan, but the wording used by sales teams can often confuse the matter. Because this policy is easy to sell, the mortgage providers who will ‘recommend’ such policies to unwitting home owners as a further way to profit from the mortgage application, without it actually being useful for that individual. DON’T BE FOOLED – Your application is processed based on a number of factors, including your income, credit rating, and financial history and NOT whether or not you buy the MPPI !
Some example of when MPPI might be suitable for you:
- If you have a history of sickness or illness which may affect you working.
- If you do not receive adequate sickness / redundancy pay to cover the mortgage payments
- If you are in a job which may not be ‘stable’ (although you never can tell..!)
MPPI probably isn’t suitable if :
- You already have insurance which covers this.
- You have a large volume of savings that you would happily use for payments if required
- You have a low monthly mortgage which could be easily paid by a partner or on even a basic salary.
- There is a low maximum payout cover, or you are only covered for a small number of claims.
When decided whether or not to go forward with a mortgage protection policy, make sure you check the clauses and pay out periods as these can dramatically influence your decision to go ahead. If you are keen to take out the insurance, make sure you go with an external supplier which will usually give a far better premium. I will be sure to review some of the better offers around the UK, and let you know in due course.
