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Just as you can cover your life with life insurance and your car with car insurance then you can cover the repayments of your mortgage with mortgage protection. This is a valuable form of insurance that would allow you to ensure you would not get behind on your mortgage repayments and so not be at risk of losing your home through repossession.

When you take into account the fact that you will be repaying your mortgage over many years the chances of you not falling ill and having to take some time from work are very slim. All being well it would be in the short term and would not a problem. However you also have to take into account that you could be unable to work for many months or you could suffer an accident that meant you were unable to work. You also have to give some thought to the possibility that you might become unemployed through such as redundancy while repaying your mortgage.

By taking out a policy you will receive an income which is the sum you insured for when taking out the policy. This will go towards setting the amount for the premium that you pay each month along with age and which type of policy you want to take out. The younger generation who are buying a home for the first time very often take on a huge mortgage which leaves them with very little money to pay the high cost of some premiums to cover their mortgage. An age based mortgage policy is affordable and it can stop you losing your home.

While you can take out mortgage protection to cover the possibilities of accident, sickness and unemployment together, you can also tailor the policy. If you wish you can just take out protection for accident and sickness only or for unemployment only.

With a policy behind you, you would not have to give any thought to where you would get the money needed to be able to continue meeting the repayments of your mortgage. You would be able to rely on the tax-free income given to you by your policy once it had started to payout. Some providers will offer cover that would begin from day 30 and others might state you cannot claim until the 90th day. You also have to determine for how long the policy would payout. Some providers will pay 12 monthly repayments and others could offer a policy that would provide 24 monthly repayments.

This is not the only reason why you have to check out the terms and conditions of the policy. All policies will come with some exclusions and these have to be checked against your circumstance so that you can be sure you would have something to fall back on. Ethical providers would add-in only the most frequently found exclusions but some providers might add in more. Mortgage protection does do the job of protecting your mortgage repayments providing it is a suitable product for your circumstances, so always make use of the information a specialist provider will give you before taking out the policy.

A lady who went through a divorce had always relied on her husband to take care of the bills and manage the household finances. Once she was on her own, out of pure carelessness she forgot to make a couple of payments on some credit cards which caused a dramatic drop in her credit score. When she needed to purchase a car that would handle the needs of a single mother, the interest rates she was offered were so high that she opted to use a home equity loan to purchase the vehicle. She was sold on a variable rate interest only loan that gave her an extremely low payment but she was never told how the loan actually worked. Now, five years later, she still owes the original $30,000 that she borrowed and has a vehicle that needs to be replaced. She can’t consider walking away from the loan or she could lose her house.

Another lady decided to refinance to consolidate some debt. Later, after running up some more debt due to family illnesses in another country which required time off the job and costly travel, she added a home equity line of credit. Both loans offered the interest only option. Again it was never explained how these loans work so she has spent several years thinking she had a nice low payment without realizing that her principle was not going anywhere.

Too many people simply don’t understand lending in general, so to put a somewhat complicated loan in front of them without covering all of the possibilities is unfair at best and disastrous at worst. To spend years paying on a loan with a balance that never declines makes you very popular with your lender, but does nothing to help you eventually own your property outright.

Interest only means exactly that. You pay only the interest on your loan so the original principle is untouched. The loan still has to be repaid eventually and at some point will have to become fully amortized, meaning that you will have to pay enough to repay the loan in full by the end of the given term. On a 30 year mortgage, if the loan becomes fully amortized after 10 years, you would essentially have 20 years left to repay the loan. Since the principle has never been touched, it is the same as if you took out a brand new 20 year mortgage on your property. The difference in payment can be dramatic.

Using the example above, let’s assume that you borrowed three hundred thousand dollars. Most interest only loans are variable as well which usually adjust at the same time that they become amortized. In this case, the loan was originated at 5.75% and we will figure that it adjusts upwards by one point after 10 years to a rate of 6.75%. For years one through ten your payment would be $1437 per month. But after ten years, your payment would jump to $2281 per month, an increase of over $800. Considering that rates are exceptionally low right now, it is entirely possible that future rates could be much higher. Should they climb enough to make your rate 11.75%, your payment would be $3251 per month. You better be making a lot more money by then or you could find yourself being forced to sell the house.

Of course the lenders will typically say that the borrower should not have signed something they didn’t understand and that everything they need to know is right in the paperwork. To a degree this is true. You should never sign anything you don’t understand, but at the same time you develop a relationship with your mortgage broker and consider this person to be an expert as well as an advisor. You rely on your loan officer to steer you in the right direction.

Unfortunately, by relying on someone who is relying on you for his income, you have put your financial future in the hands of someone facing a very basic conflict of interest (no pun intended). If you don’t close on a loan, he doesn’t get paid. I’m not trying to say that there are no loan officers that can be trusted. You just have to be careful. It’s just a very competitive business and some people will use any edge they can find to make money.

To add to the issue, you are qualified for the loan based on the interest only payment. This allows you to buy a much more expensive house than you can really afford. These interest only loans as well as some other creative loan products are a big part of what fueled the runaway real estate bubble that has since burst. The individual that bought into a payment they could barely afford with the intention of selling the house in a few years for a huge profit is now stuck in a home that isn’t worth anywhere near what they paid for it. Adding insult to injury, the balance hasn’t dropped a dime. Of course in this instance it’s a bad business decision rather than a lack of understanding of the loan product.

There are reasons to do an interest only loan. A investor that is buying a run down house to repair and resell for a profit might choose the interest only option to allow more cash flow to spend on the repairs so he can flip the house more quickly. There are some other scenarios where it might make sense as well, but to take the loan just because of the allure of the low payment can end very badly for you.

About the Author

Kevin Maher is the Agency Liaison at Debt Management Credit Counseling Corp (DMCC), a 501c(3) non-profit charitable organization offering free financial and budgeting education across the USA. For information call 866-618-DEBT or visit http://www.dmcccorp.org. Kevin's email is kevin@dmcconline.org

Providing you read the terms and conditions of the cover before taking out a policy, mortgage payment insurance can be an effective safety net on which to rely. It would give you the income you insured against at the time of applying for the policy if you cannot earn your own income.

You are able to apply for cover based on your circumstances. For example you could protect against accident, sickness and unemployment together. You could also choose to protect against unemployment only or accident and sickness only if you wished. The premium you have to pay for the protection will be based on the level, how old you are and the amount you wish to protect. As cover is age based this means that first time home buyers can afford to pay for protection even with an over stretched budget.

To get the cheapest mortgage payment insurance you have to compare premiums online. Standalone payment protection specialists will offer the cheaper quotes and you also have to compare the terms and conditions of the policy. Some policies would begin to provide you with an income after only 30 days and backdate the benefit to the first day of unemployment or incapacity while others might state 90 days. A policy could provide you with an income each month for 12 months or it could run for 24 months.

When you consider the consequences of missing just a couple of repayments on the mortgage and not being able to catch up you can see why mortgage insurance is so valuable. If you just miss one payment this will be enough for the lender to call you into see them. If you can come to an agreement for repaying the arrears and continuing with the mortgage then all could be well, however you would have to be able to show that you could do this and if you had not got an income that would be impossible. Of course you probably will not know how long it will take for you to recover and get back to work or to find another job. If you cannot come to an agreement and you continue to get into arrears then the lender will have no choice but to start proceedings to take your home.

Many homeowners are under the impression that they would be able to claim benefit from the State. While you might be able to get help with your mortgage from the State it would only go towards the interest part of the mortgage. You would have to be eligible to claim and this means among other things that you have to be claiming income support and you not have a partner living with you who is in full time work.

Of course you would have to ensure that mortgage payment insurance would be suitable. While it is an excellent product to have in your corner it is not suitable for the circumstances of all individuals. You would need to check the terms and conditions but all ethical providers of payment protection products would provide you with this information on their website.

It's said that every home in the United States carries an average of $2000 in credit card debt. While not all of us are carrying any debt at all, more of us are carrying far more credit card debt and other debt than this average. This is why more people are looking for new ways to consolidate their debt and pay them off as quickly as possible. But while debt consolidation can't really help you with a shopping addiction, it can help you with your financial troubles.

What is a Second Mortgage?

Your home is a major financial investment in your life - probably the biggest one you will ever have. It is hundreds of thousands of dollars of long term investing and payments. But as you pay off your home, you begin to 'own' more and more of it. You begin to create a difference between what you owe and what you don't have to pay. This difference is the equity in your home, or the value. When you have paid off $75,000 of your mortgage, you essentially have that money (less interest) as a part of your net worth. Why not make it work for you?

A second mortgage is another loan secured against the available equity in the home. Since you have built up equity in your home, you can borrow that equity as a second mortgage in order to free up some of your home's value now - rather than waiting for the sale. Talk to your lender to see if you can qualify for a home equity loan.

If you do, you will then be given access to an account, much like your typical checking account. Or you can simply receive a check for the loan amount. But this needs to be put to good use in order to save you from your financial stresses, instead of just adding to them.

Why Your Debt Needs to be Consolidated

Debts are anything that you are making payments on - credit cards, cars, computers, etc. These debts are generally all being paid off in installment plants, with corresponding interest rates. And in all honesty, it's a pain to pay off multiple debts. You have to remember numerous bills each month, all with different due dates and amounts to be paid. Even worse is that fact that each additional charge on these kinds of accounts is only adding to your debt. What if there was a way to make things easier?

That's where debt consolidation comes in. This is when you take one big check and pay for all of your debts at the same time. In this way, you will have 'finished' your debts and now just have to pay one single payment each month to get them paid off.

The Benefits of Debt Consolidation

Not only will you get to cut back your number of bills each month, but you will also have a fixed interest rate for the debts. This means that you don't have to worry about interest rates going up and down - and in most cases, you will actually get lower interest rates, saving you money on the debts that you do owe.

The convenience of this plan also helps you stop missing payment or making late payments.

How You Can Avoid Debt in the Future

But while debt consolidation can help you make your debts more manageable, you will still need to pay them off. And in the meantime, you will also want to start following a budget and only buying what you can really afford right now. That's something that is an investment in future financial security.