Mortgage protection

When working out how much you can afford to put down as a deposit, it’s important to take into account the other costs of buying and moving.

As well as solicitor’s fees, stamp duty and buildings/contents insurance you may also need to pay insurance to protect your mortgage repayments.

What is mortgage protection insurance?

Because you run the risk of losing your home if you don’t keep up your mortgage payments, you may want to take out mortgage protection insurance which would help you if, for example, you have an accident which means you are unable to work.

To help you decide if this insurance is right for you have a look at Which?

What is a mortgage indemnity guarantee (MIG)?

This is sometimes called a mortgage insurance premium (MIP). This covers the lender if you default on the loan (don’t pay off your mortgage), though if this happens, you are still likely to be pursued by the insurer for the money they paid to your lender. You are likely to have to take out a MIG if you are borrowing 90% or more of the value of the property.

What is accident, sickness and unemployment (ASU) insurance?

This is sometimes confusingly called ‘mortgage payment protection insurance’ or ‘PPI’ but is different from ‘mortgage protection insurance’ as above. It’s cover would keep up your repayments for a time if you are unable to work because of illness, accident or being made redundant. You need to check carefully if the policy is suitable because many will not cover self-employed, part-time or contract workers, for example.

ASU policies are quite expensive. Also, most will not pay out until a few months after you are unable to work, and then for no longer than a year or two. So whether you need this kind of cover may depend on whether you have enough savings or other assets that could keep you going for a while.

The Money Advice Service has produced a useful guide to whether or not you may need PPI that can be found here.

We are sorry that we cannot provide this information in Welsh, however if you would like to speak to an adviser in Welsh please contact 0345 075 5005.

This page was last updated on: October 2, 2018

Shelter Cymru acknowledges the support of Shelter in allowing us to adapt their content. The information contained on this site is updated and maintained by Shelter Cymru and only gives general guidance on the law in Wales. It should not be regarded or relied upon as a complete or authoritative statement of the law.