life insuranceFrequently asked question
Do I need Life Insurance to get a mortgage?
Mortgages eh, who needs ‘em?
Turns out most of us, if you don’t want to pay rent or live with your parents for the rest of your life.
The word mortgage literally means ‘dead pledge’ – from the Latin mort meaning ‘dead’ + gage meaning ‘pledge’. It’s a commitment that finishes either when the debt is paid off or the payment fails. NOT when the person with the debt dies. That fiddly detail is an important one when it comes to looking at mortgages and life insurance.
You can take a lot of things to the grave..
…but mortgages aren’t one of them. Despite what some might think, your mortgage debt doesn’t shuffle off with you when you die. The truth is, if no one inherits the property to pick up the mortgage bills, your estate or the property itself will be sold off to cover the outstanding debt.
No family needs that stress when a loved one dies, which is why many people choose to cover their mortgage debt with life insurance.
So do I NEED life insurance to get a mortgage?
Will mortgage providers refuse to cough up the cash if you’re not insured? Nope.
The vast majority of banks, building societies and other mortgage providers will gladly lend to you even if you don’t have life insurance cover, as long as you meet all the other financial requirements. So nope, life insurance is probably not required. They more likely will ask you to take out buildings insurance – that is to cover the house from catastrophe such as fire, flood and other biblical stuff, but that’s not the same as insuring your life. Here they’re asking you to insure the asset (the house).
Upsell me baby
That said, many mortgage providers and financial advisors may suggest you consider a variety of financial products such as payment protection, critical illness, income protection (and there’s more) when you take out a mortgage, it’s a big commitment after all.
Let’s face it, the bank, building society or provider already has your property as collateral if you die or are unable to repay the debt for whatever reason. Died without life insurance? They’re sorted either way. Your dependents, on the other hand, probably won’t be so chuffed.
So that’s the lenders covered, but what does the law have to say on the matter?
The UK actually has no laws, codes or decrees compelling you to get life insurance before you can be approved for a mortgage or any other type of loan.
Unlike with cars, where you have to insure it before you start burning rubber, with mortgages, you just need to prove to the lender that you have the income to meet the repayments each month.
So, as well as no mortgage policy requirement, there’s also no legal obligation either. Which means legally, no you don’t HAVE to take out life insurance to get a mortgage.
The sensible choice
Sensible isn’t cool. Sensible doesn’t take you on adventures. But while there’s nothing compelling you to take out life insurance – for a mortgage or for any other reason – it makes a lot of sense to get some financial protection in place.
A mortgage is likely to be the biggest debt you’ll ever owe. Which means it could also be the biggest debt you leave behind if you die before paying off the last doorknob.
If you have children, a partner or anyone else who depends on you to keep the roof over their head, it’s a no brainer. It’s a good question to ask yourself ‘When should I think about getting Life Insurance‘.
Even if your mortgage boasts your name and your partner’s name, chances are it was granted based on your joint income. So you need to seriously ask yourself, if one of you dies, would the other end up in a financial pickle if the mortgage wasn’t covered.
Having life insurance in place can give you and your loved ones peace of mind knowing your debts will be covered when you’re gone.
A word to the wise
Top tip: you might struggle to find anyone who won’t recommend you take out life insurance to cover your mortgage. So make sure you don’t rush into anything.
Some cheeky mortgage providers may even twist your arm into purchasing their or their partner’s life insurance when you take out a mortgage. This can end up in people paying extortionate life insurance costs, and it may even constitute as mis-selling.
If you’re worried that you’ve been mis-sold life insurance with your mortgage, talk to the kind folk over at the Financial Ombudsman Service.
A deathwish come true
If you want to protect your mortgage, don’t get stitched up with expensive life insurance. At DeadHappy, we offer cheaper, quicker and better life insurance plans. With our unique deathwishes, you can make sure you’ve covered your mortgage, your funeral, charity donation, a luxury holiday for your friends and family or most importantly, whatever is most important to you.
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