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Mortgage Repayment Insurance

Discussion in 'The Pub' started by Wallsy, Oct 31, 2011.

  1. 'ello...

    I'm looking at buying my first place but work's a bit 'volatile' at the moment, so I half expect to get the flick in a couple of years.

    Does anyone have any experience with mortgage insurance with regards to being made redundant or unemployment? Good stories / bad stories / any stories?

    What about illness or injury?


  2. I got made redundant about 1 year into buying our first place. I got a good payout and had another job 4 weeks later. The job I took was not great, but it paid the bills.

    Most financiers will force you to take out mortgage insurance if you borrow more than 80% of the value of the house.

    We were forced to take out mortgage insurance, as we borrowed 90%, but we never used it. Funny thing was, I refinanced about 2 years in because the lender went bust and our loan defaulted to some shitty NAB product. By then, the valuation of the house had risen, so we were only borrowing about 70%, so I actually got a refund on the mortgage insurance!
  3. A common misconception is that mortgage insurance is to cover you in case can't pay. Mortgage insurance (when you borrow over80%) is to protect the bank in case you default and the subsequent sale of your property does not cover your loan. The insurer will still have an option to chase you for this though.

    Your best bet is to look at income protection (or similar) that will cover you in the event of illness/injury and redundancy. The devil is in the detail though eg sometimes if you take a voluntary redundancy or get a summary dismissal you may still not be covered. Also most policies will only cover up to 75% of your normal wage.
  4. Pretty much what Robbie has said above

    If you mean the insurance the bank forces you to take if you borrow > 80% of the value
    It won't help you at all.

    If you miss your payments the bank will still foreclose on you.
    The insurance only protects the bank in case the repo your house and then can't sell it for enough to cover the loan.
    And then the insurance company will probably sue you.

    If you're worried about getting sick or fired and not being able to make payments, you might want to look at income protection insurance.
    Though that usually requires you to be off work for a couple of months before it kicks in.

    Anyway.. see a financial planner for proper advice, but I've always thought your best bet is to get ahead on the payments as best you can. And that you have a buffer in case anything goes wrong.
    And if it doesn't, then you're ahead on your mortgage instead of having handed it to an insurance company.
  5. The mortgage insurance the bank will want you (make you) take if you borrow over a certain % of the property value is NOT FOR YOU. It insures the BANK against you defaulting.

    If you can't pay, your still screwed.

    If you want extra cover, then income insurance is a much better bet (to cover you if unemployed, injured etc) but I'm still not a big fan.

    Best insurance you can get on a house is this:

    1) Buy a property you could afford if your wage was only ~75% what it is.
    2) Pay at 10% more then the minimum. If the bank lowers rates, leave yours. If it raises rates, raise yours if you can, otherwise at least you have a buffer.
    3) Plan to have 6 months of savings in liquid capital for any eventuality. Holidays, toys, etc do NOT eat into this. it isn't a fun saving, it is a 'wholly shit' saving.
  6. My partner and I are saving for our first home and we have this approach planned. We'll buy something that gets us into the market without too much mortgage stress - thankfully we're too smart to go for the dream home as our first home (unlike so many people foolishly do). Even once it's bought we'll keep saving hard and get well ahead. The house will ultimately belong to somebody else anyway (ie we'll die, and somebody else will come along and bust their gut on a mortgage just as the owners before us did) so it's no use losing these never-to-come-again years to anxiety.
  7. I have seen some mortgage insurance that also contains income protection insurance. I know ours did.
  8. Two completely different products. Mortgage insurance is sold to the bank in the background and the bank tacks it onto the loan amount. Income insurance is something that you're able to get independent of the bank or the bank will have a preferred insurer that they will use. Keep in mind that you won't get the best premium quote using the banks preferred insurer, as they will include a referrers fee into the premium. Try calling Avida or someone similar to see if they can offer a cheaper product.
  9. Doesn't always mean better. Cheaper product = less quality.

    Best way is to call an insurance broker/financial planner. They will reccomend a product that is best for you, provide advice on your situation, and even better, if you don't wish to take it up, usually you won't even pay a fee. They will also be able to compare multiple products based on your circumstances to show you what your best options are.

    Let me know if you need a referral for a broker/planner.
  10. income Protection covers your wages with regards to Sickness or Accident ONLY, nothing covers you for job loss. The mob I work for have Income Protection at 75% of your wage AND 10% on top that keeps paying into your Super..
    If you have Income Protection outside of Super, you can claim this as a tax deduction, if it is within super then can not as you'd be 'double dipping'.
    Compare apples with apples, with Income Protection, you will have a 'waiting period' this can be a 60 day wait [2 months no payment] or a 30 day wait, there is also a benefit period this could 2 years or till age 65.
  11. Yeah, a broker is better. The point i was making was that they're separate products.
  12. Some good info, cheers. Need to look around for the right product... if it exists.

    Insurance sh1ts me to tears. Every time there's a natural disaster or some major event when people really need the help, they seem to weasel their way out of payment...
  13. I'd agree with that, but then people do not read their policies as well. Do people really know whether their house is covered for flooding? Storm damage Vs river flooding? What $ do you get if your bike is stolen and trashed?

    If you want income insurance, make sure you have read the fine print. How much, for how long, under what circumstances. Are you covered if you crash your bike or is that a 'dangerous pastime' that voids the policy? Is skydiving bad but bungy jumping OK etc.etc.

    If you can't/won't read your policy then it is a s good as the time you spent on it.
  14. I bought my first home 2.5 years ago on a single income (before house prices went through the roof). I had to get mortgage insurance (which is for the banks safety) and while I was going through the whole "insurance" phase, I took out an income protection with the bank (CBA). Having a home loan, all bank accounts and, at the time, home insurance with the bank, I got a better price on the income protection/Life insurance combination.

    You have to make sure you read the fine print on your income protection, they don't cover EVERYTHING. I spoke to my financial adviser/planner who was also my home loan adviser and told me all the details regarding income protection and what they cover etc. With my policy, I am covered for loss of job, redundancy and accident up to 6 months at 80% of my salary. Can't remember if this was part of the income protection or Life insurance, but my parents get paid out to cover the cost of my mortgage as well as my funeral in case of death, I get half my death cover if I was permanently disabled due to accident at work/public place/road (no extra cost for being a motorcycle rider either which was surprising).

    With the above policy, if I paid a further $2000 on my current premium per year (as if current premium wasn't enough), they would cover me if I was to die, have an accident (leaving me out of work for months) or permanently disabled when the incident occurred on the race track.

    I always wondered though...are we covered by the Superannuation Life insurance if we were to have an accident on the race track? I have not been sent out their policy...also in regards to the "double dipping" mentioned above, would the Super Life insurance pay out as well as my CBA insurance if I was to get into an accident...either death or permanent disability? Always wondered that...