24A Macarthur Street, Parramatta NSW 2150
02 9683 2869

Do you have the right protection for your loan?

Buying a property is one of the biggest investments many people will make in their lives. When it comes to securing a mortgage, many buyers may be so focused on the immediate steps ahead that they don’t consider having the right protections in place first.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

What are the different insurances that can protect a home loan?

Three key types of insurance will protect your mortgage:

  • Lenders mortgage insurance;
  • Mortgage protection insurance;
  • Income protection insurance.

Understanding the different insurances available for your mortgage for further protection is an important part of protecting yourself and your loan if you’re unable to meet repayments.

Lenders mortgage insurance (LMI) is a one-off premium payable if you want to buy a home, but your deposit is less than 20 per cent of the property’s value. LMI protects the lender in the event you’re unable to repay your loan. The premium is added to your total home loan amount, which means you’ll pay more interest over the loan term. While the extra interest is one of the main drawbacks of LMI, it helps people enter the property market sooner.

Mortgage protection insurance protects you if you’re unable to make loan repayments due to serious illness, injury, or death. Each policy is different depending on the insurance provider, but generally provide trauma, death and terminal illness and special injury benefits. These benefits are typically paid in a lump sum.

Income protection insurance can pay up to 85 per cent of your gross income if you’re unable to work due to partial or total disability. The definition of disability and the level of cover provided depends on the insurance policy.

What happens if you don’t get insurance for your mortgage?

If you don’t invest in protecting yourself and your home loan, you could end up in a costly financial situation. So, while the premiums for key insurances may seem like they add up, it far outweighs the risk of being unable to meet your financial obligations or support any dependents if you can’t repay your mortgage. Let’s look at an example.

Sam is 34 and a non-smoker. His home loan is $450,000. Unfortunately, Sam recently had a major fall at work, resulting in a head injury and several broken bones. He is unable to work for several months. With his mortgage protection insurance, he could access his specified injury benefit and receive a lump sum of $8,500. Sam’s income

protection insurance will pay 75 per cent of his salary for six months while he recovers. With these insurances in place, Sam could continue paying his mortgage and meet his living expenses while recovering from his injuries. Without these insurances, he may have had to sell his property and live off his savings.

How do you know which mortgage insurance to get?

Many mortgage holders have insurances attached to their superannuation or health insurance providers, so be sure to double-check the cover you already have before applying for any additional extra cover.

If you’d like to speak with someone independent of your mortgage application process, the Australian Government offers an assistance service. Contact the National Debt Helpline on 1800 007 007 to speak with a financial counsellor about protecting your mortgage. Additional services are available for small business owners, farmers, or people in regional areas.

Alternatively, speak to your financial adviser to be sure you protect your loan and your financial security.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without considering your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees, and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

https://www.macarthurwealth.com.au/inheritance-advice/

https://www.macarthurwealth.com.au/about/

https://www.facebook.com/macarthurwealthmanagement

https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

https://www.linkedin.com/company/macarthur-wealth-management

https://www.instagram.com/macarthur_wealth/

Scroll to top