Do I need life insurance to get a mortgage?
So you’ve had your offer accepted on the house you want to buy, and you’ve just had confirmation of your mortgage approval (great news!), so now all that’s left to do is sort out the insurances that you need to make sure nothing delays you from getting the keys to your brand new home!
With so many different insurance policies available, it’s not always clear which ones you definitely need as a legal requirement to get a mortgage, and those that are optional.
Contrary to popular belief, you do not need to take out life insurance in order to get a mortgage.
One of the main reasons why people take out life insurance is to ensure that their families are able to carry on paying the mortgage, in the event of your death. The consequences of not being able to pay your mortgage could end in your family being forced to sell their home and move out, which wouldn’t be the prefered option at all.
What insurances do I need to get a mortgage?
The only insurance you need as a legal requirement when getting a mortgage is buildings insurance.
Buildings insurance covers your home against any damage that may need to be repaired. This type of insurance only applies to the structural aspects of your home i.e. the walls, roof, floors, fixtures and fittings etc. not the actual contents of it.
Lenders need to know that you have buildings insurance in place, as their primary concern is the value of your property. For instance, if a fire was to break out in your home, without buildings insurance to cover the costs of the repairs, the value of your house would decrease, so the house wouldn’t be worth the amount of money you borrowed. This means that ultimately, the lender wouldn’t be able to get back what they leant you for the purchase of it.
Ultimately, this is the reason why buildings insurance is a legal requirement when you get a mortgage, whereas life insurance isn’t. But aside from this, it’s a good insurance to have anyway, as why wouldn’t you want to look after what is probably the most prized asset you own?
For further information about different protection products and how they could help keep you in your home once you’ve moved in, please feel free to contact our specialist protection team for advice today.
Because we play by the book we want to tell you that…
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.