How many of you feel the need for a second loan when you are still busy paying off the monthly installments of the first loan? Well, ask the young generation; most of them would need a second loan to support their lifestyle. Surely, there is no harm in taking a second loan if you are confident of paying it off. Most of the times, people go ahead for loans as it eliminates the need to save money for quite some time to buy a car or go for a holiday. A loan allows them to enjoy the benefits of the product or service while paying monthly installments for it. However, let us first understand what second mortgage loans are.
Second mortgage loan, as the name implies, is a second loan that you can secure over and above the existing first loan. This second mortgage loan allows you to borrow money on the basis of your home equity. Home equity is simply the difference between the present appraised value of your home and the amount of money being paid for your first loan. Based on this calculation, banks or other financial institutions can offer you a second mortgage loan, which is anywhere between 85-125 percent of the appraised value of your current home. However, be prepared to pay more in term of interest rates for the second mortgage as the first loan holds priority over your home in case you turn into a defaulter.
There could be a number of reasons, which compel you to go ahead for a second mortgage loan. There might be an instance where you find yourself in a lot of debt due to intensive shopping through your credit cards. You could also need an auto loan to purchase a new sports car to please your fiance! On the other hand, the hospitalization of a family member and the huge medical bills could be a strong reason for you to secure a second loan. Whatever may be the reason, make sure you do your homework well before going ahead for a second mortgage loan.
Second mortgage loan, as the name implies, is a second loan that you can secure over and above the existing first loan. This second mortgage loan allows you to borrow money on the basis of your home equity. Home equity is simply the difference between the present appraised value of your home and the amount of money being paid for your first loan. Based on this calculation, banks or other financial institutions can offer you a second mortgage loan, which is anywhere between 85-125 percent of the appraised value of your current home. However, be prepared to pay more in term of interest rates for the second mortgage as the first loan holds priority over your home in case you turn into a defaulter.
There could be a number of reasons, which compel you to go ahead for a second mortgage loan. There might be an instance where you find yourself in a lot of debt due to intensive shopping through your credit cards. You could also need an auto loan to purchase a new sports car to please your fiance! On the other hand, the hospitalization of a family member and the huge medical bills could be a strong reason for you to secure a second loan. Whatever may be the reason, make sure you do your homework well before going ahead for a second mortgage loan.
Taking out a mortgage is a huge responsibility as, if you do not continue to meet your mortgage repayments, you are at risk of losing your home. With this in mind you might want to give some thought as to how your loved ones might manage if you as the main wage earner were to die before the mortgage balance was paid off. If you want peace of mind of protection for your mortgage in the event of your death then you may wish to consider mortgage life cover.
What is mortgage life insurance?
Mortgage life cover is also known as decreasing term insurance and is one of the several types of life insurance available. This specific type of protection is typically taken out by the main wage earner, the one responsible for repaying the mortgage each month. If both partners pay an equal share in the mortgage repayments then you may wish to take out mortgage life insurance for both names on the same policy, a joint policy. If taking a joint policy the insurance company typically pays out upon the death of the first policyholder. Alternatively, you may wish to take out separate policies.
How does mortgage life protection work?
When taking out mortgage insurance life cover you take out the policy for the amount that is left outstanding on your mortgage at the time of applying for the life cover. For instance, if you have £10,000 left to pay on your mortgage this could be the sum insured.
The term you take your mortgage life cover over is the term that is left on your mortgage at the time of applying for life insurance. For example, if you have 5 years left to pay on your mortgage this is the term that you take out mortgage life insurance over.
With the above example, you are covered for £10,000 and for a term of 5 years. If the person named on the insurance were to pass away during the 5 year period, the mortgage balance would be cleared by the proceeds from the life insurance.
As you continue to pay your mortgage each month the amount left owning on it decreases of course, and so does the amount your decreasing term insurance pays out. If you outlive your insurance policy this means you have paid off your mortgage and there is no balance, so there is no payout and the policy simply expires.
Mortgage life cover may make a huge difference for your loved ones in the event of your death. Without a policy, they may struggle to find the money for the mortgage repayments and this may, in the worst case, lead to repossession and eviction. You may also wish to give some thought to how you and your family might manage if you suffer a critical illness. With advancements in medicine, many people suffering from a critical illness now live longer with their incapacity. However if you are disabled and unable to work you may struggle to find the money for your mortgage repayments. With this in mind you may want to consider having critical illness insurance alongside your decreasing term insurance.
David Thomson is Chief Executive of BestDealInsurance a completely independent specialist broker dedicated to providing their clients with the best insurance deal. They offer great value life insurance as well as, critical illness and income protection, ensuring that their clients have the protection they need, without leaving a hole in their pocket.
What is mortgage life insurance?
Mortgage life cover is also known as decreasing term insurance and is one of the several types of life insurance available. This specific type of protection is typically taken out by the main wage earner, the one responsible for repaying the mortgage each month. If both partners pay an equal share in the mortgage repayments then you may wish to take out mortgage life insurance for both names on the same policy, a joint policy. If taking a joint policy the insurance company typically pays out upon the death of the first policyholder. Alternatively, you may wish to take out separate policies.
How does mortgage life protection work?
When taking out mortgage insurance life cover you take out the policy for the amount that is left outstanding on your mortgage at the time of applying for the life cover. For instance, if you have £10,000 left to pay on your mortgage this could be the sum insured.
The term you take your mortgage life cover over is the term that is left on your mortgage at the time of applying for life insurance. For example, if you have 5 years left to pay on your mortgage this is the term that you take out mortgage life insurance over.
With the above example, you are covered for £10,000 and for a term of 5 years. If the person named on the insurance were to pass away during the 5 year period, the mortgage balance would be cleared by the proceeds from the life insurance.
As you continue to pay your mortgage each month the amount left owning on it decreases of course, and so does the amount your decreasing term insurance pays out. If you outlive your insurance policy this means you have paid off your mortgage and there is no balance, so there is no payout and the policy simply expires.
Mortgage life cover may make a huge difference for your loved ones in the event of your death. Without a policy, they may struggle to find the money for the mortgage repayments and this may, in the worst case, lead to repossession and eviction. You may also wish to give some thought to how you and your family might manage if you suffer a critical illness. With advancements in medicine, many people suffering from a critical illness now live longer with their incapacity. However if you are disabled and unable to work you may struggle to find the money for your mortgage repayments. With this in mind you may want to consider having critical illness insurance alongside your decreasing term insurance.
David Thomson is Chief Executive of BestDealInsurance a completely independent specialist broker dedicated to providing their clients with the best insurance deal. They offer great value life insurance as well as, critical illness and income protection, ensuring that their clients have the protection they need, without leaving a hole in their pocket.
Buying a family home is a time when many people begin thinking about taking out a life insurance policy to go along with it. A mortgage is very often the most significant financial decision that any individual makes, and it is always prudent to find a way of protecting your mortgage, to ensure that your loved ones will not suffer financially from the loss of your income if you should die. A carefully-chosen life insurance policy is an ideal method of achieving this protection.
Level Term and Decreasing Term Life Cover
The most common way of protecting your mortgage is to purchase term life assurance. Selecting life cover for mortgage protection requires making a choice between two different types of insurance-level term and decreasing term insurance.
If you purchase level term life cover, the amount you are insured for remains constant over the life of the policy. With a decreasing term policy, on the other hand, the size of the potential pay-out decreases as the mortgage is paid off. Regardless of which type you choose, the policy ends automatically if a claim is made, or when the mortgage is paid in full.
The Cost of Mortgage Life Insurance
The cost of mortgage life cover depends on several factors. The most important determinant of the cost of the policy is the terms and conditions of your mortgage-the amount you borrow, and the amount of time you'll require to pay the mortgage in full. As will all types of life cover, the cost also depends on your lifestyle, age, and physical health. Lastly, the type of policy you choose-level term or decreasing term insurance-also affects the cost.
In most cases, level term mortgage cover is more expensive than the decreasing term variety. This is because with decreasing term insurance, the size of the pay-out decreases over time, so the overall cost of premiums is reduced to reflect that. Because all other aspects of these two types of policies are more or less equal-in both cases, the mortgage is fully paid in the event of a claim being made-the type of insurance you get will typically depend on how much you can afford.
Level term cover does offer one advantage that decreasing term insurance does not. Because the size of the pay-out is constant over the life of the policy, your dependents will benefit from increased financial security if there is money left over after the mortgage has been paid. For this reason, level term insurance should be your goal if it's affordable. This type of insurance provides another advantage if you have an interest-only mortgage, as your repayments increase over time, and equity is slow to build-a level term mortgage can provide increased financial security in this case.
Other Considerations
Two other important decisions to make are whether to choose joint insurance or two separate policies for you and your partner, and whether or not to purchase additional critical or terminal illness cover. Some policies may include this coverage automatically, and some don't, so it's always important to read the fine print and make sure you understand what you're covered for. By the same token, a joint policy isn't always the best solution, even for a married couple, so it's equally important to check investigate all your available options thoroughly before deciding between joint and separate policies.
Get comprehensive protection for your mortgage at discount premium rates with Life Saver Instantly compare mortgage life insurance premiums from major insurers and apply for cover in minutes.
Level Term and Decreasing Term Life Cover
The most common way of protecting your mortgage is to purchase term life assurance. Selecting life cover for mortgage protection requires making a choice between two different types of insurance-level term and decreasing term insurance.
If you purchase level term life cover, the amount you are insured for remains constant over the life of the policy. With a decreasing term policy, on the other hand, the size of the potential pay-out decreases as the mortgage is paid off. Regardless of which type you choose, the policy ends automatically if a claim is made, or when the mortgage is paid in full.
The Cost of Mortgage Life Insurance
The cost of mortgage life cover depends on several factors. The most important determinant of the cost of the policy is the terms and conditions of your mortgage-the amount you borrow, and the amount of time you'll require to pay the mortgage in full. As will all types of life cover, the cost also depends on your lifestyle, age, and physical health. Lastly, the type of policy you choose-level term or decreasing term insurance-also affects the cost.
In most cases, level term mortgage cover is more expensive than the decreasing term variety. This is because with decreasing term insurance, the size of the pay-out decreases over time, so the overall cost of premiums is reduced to reflect that. Because all other aspects of these two types of policies are more or less equal-in both cases, the mortgage is fully paid in the event of a claim being made-the type of insurance you get will typically depend on how much you can afford.
Level term cover does offer one advantage that decreasing term insurance does not. Because the size of the pay-out is constant over the life of the policy, your dependents will benefit from increased financial security if there is money left over after the mortgage has been paid. For this reason, level term insurance should be your goal if it's affordable. This type of insurance provides another advantage if you have an interest-only mortgage, as your repayments increase over time, and equity is slow to build-a level term mortgage can provide increased financial security in this case.
Other Considerations
Two other important decisions to make are whether to choose joint insurance or two separate policies for you and your partner, and whether or not to purchase additional critical or terminal illness cover. Some policies may include this coverage automatically, and some don't, so it's always important to read the fine print and make sure you understand what you're covered for. By the same token, a joint policy isn't always the best solution, even for a married couple, so it's equally important to check investigate all your available options thoroughly before deciding between joint and separate policies.
Get comprehensive protection for your mortgage at discount premium rates with Life Saver Instantly compare mortgage life insurance premiums from major insurers and apply for cover in minutes.
For most of us, a mortgage is the essential source of funds that enables us to buy a home. We commit ourselves to making monthly repayments over many years. But what if the mortgage holder dies before the loan has been fully repaid? Would those left behind, family and loved ones, have sufficient resources to pay back the lender? If not, would the property have to be sold to obtain the necessary funds? Even if the deceased's nearest and dearest were able to pay off the loan, what impact would that have on their finances?
There is an obvious need to ensure that funds are available, on death, to pay off the mortgage. This is where a decreasing life cover policy can play an important role. This type of policy pays out a lump sum, on death or diagnosis of a terminal illness, and the amount payable decreases over the term of the policy. This is ideal for those with a repayment mortgage, where the amount of loan repayable also reduces throughout the mortgage term. Decreasing life cover is also less expensive than level life cover (where the amount payable on death stays the same throughout the term of the policy). Cover can be taken out by one person or by two people jointly. For joint policies, the life cover will be payable on first death.
The lump sum payable, under a decreasing life cover policy, will often reduce at a fixed rate set by the life cover provider. This amount may be more or less than the actual mortgage debt on death. Some providers offer to match the outstanding loan amount subject if specific conditions are met. These conditions are, typically, that the loan has stayed as a repayment mortgage, that all loan repayments have been made and that the mortgage value or term have not been increased. Many policies also offer a free period of cover, subject to certain conditions, between the exchange of contracts and completion stages of a mortgage.
Another common feature is to allow policy owners to increase their amount or term of cover when they either move to a new home or make home improvements. The increased cover, subject to certain conditions and limits, requires no further evidence of health, occupation or pastimes. The overall cost of the cover will also increase.
So, for anyone with a mortgage, it makes extremely good sense to ensure that appropriate life cover is in place. This will ease the financial burden faced by their loved ones, should the worst happen. The cost and features of decreasing life cover make it the obvious choice for mortgage protection.
John Lewis Insurance offers a range of insurance services selected by the John Lewis Partnership. These include home, car, pet, travel, wedding, event and life assurance products. Customer can visit Johnlewis-Insurance.com for further information.
There is an obvious need to ensure that funds are available, on death, to pay off the mortgage. This is where a decreasing life cover policy can play an important role. This type of policy pays out a lump sum, on death or diagnosis of a terminal illness, and the amount payable decreases over the term of the policy. This is ideal for those with a repayment mortgage, where the amount of loan repayable also reduces throughout the mortgage term. Decreasing life cover is also less expensive than level life cover (where the amount payable on death stays the same throughout the term of the policy). Cover can be taken out by one person or by two people jointly. For joint policies, the life cover will be payable on first death.
The lump sum payable, under a decreasing life cover policy, will often reduce at a fixed rate set by the life cover provider. This amount may be more or less than the actual mortgage debt on death. Some providers offer to match the outstanding loan amount subject if specific conditions are met. These conditions are, typically, that the loan has stayed as a repayment mortgage, that all loan repayments have been made and that the mortgage value or term have not been increased. Many policies also offer a free period of cover, subject to certain conditions, between the exchange of contracts and completion stages of a mortgage.
Another common feature is to allow policy owners to increase their amount or term of cover when they either move to a new home or make home improvements. The increased cover, subject to certain conditions and limits, requires no further evidence of health, occupation or pastimes. The overall cost of the cover will also increase.
So, for anyone with a mortgage, it makes extremely good sense to ensure that appropriate life cover is in place. This will ease the financial burden faced by their loved ones, should the worst happen. The cost and features of decreasing life cover make it the obvious choice for mortgage protection.
John Lewis Insurance offers a range of insurance services selected by the John Lewis Partnership. These include home, car, pet, travel, wedding, event and life assurance products. Customer can visit Johnlewis-Insurance.com for further information.