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Mortgage Life Assurance is designed to pay off the remaining mortgage debt on repayment mortgages if you die within a set period. It ensures your dependents needn′t worry about repaying the mortgage if you die. It′s full name is Mortgage Decreasing Term Assurance (MDTA). The reason it is ′decreasing′ is because your outstanding mortgage debt, and therefore the potential payout, decreases over time.
Is it worth having? Most lenders strongly recommend you get a policy when you take out a mortgage. It is useful protection and, if done correctly, should not be too expensive. We can research the market for you and find the most appropriate and cost effective policy for you.
How Much Does It Cost? MDTA has no investment element as the payment covers the balance of the mortgage and there′s no argument over whether someone has died. So it′s usually a simple case of the cheaper the better.
Costs depend on you Policy costs increase with mortgage size and length as well as the likeliness of your death during the term. This means age, sex and whether you smoke are big factors. For those who′ve quit smoking, once you′re clean for a year, it is worth a re-quote as the price may have reduced substantially.
Again if you already have a policy and you have stopped smoking ask us for a re-quote, we may be able to reduce your premiums. Some MDTA policies also factor in health, occupation and participation in risky sports. So a 21 year old, non smoking office worker, who enjoys organic food and regularly visits the gym, will probably find their policy pretty cheap.
Consider writing in trust
If you die the life assurance payment will then form part of your estate. This may make the value of your estate liable to Inheritance Tax. In many cases you can avoid this by writing the policy in trust - which means the payment goes direct to your dependents, avoiding inheritance tax. This is relatively easy to do as with most insurance policies they include the option (and papers) for writing in trust directly, at no extra charge.
Your home may be repossessed if you do not keep up repayments on your mortgage.
This article (What Is Mortgage Life Assurance?) is intended to provide a general appreciation of the topic and it is not advice. Guidance should be sought from a specialist who is qualified to advise in your specific circumstances.
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