When working out how much you can afford as a deposit take into account the other moving costs. As well as the solicitor's fees and building insurance, you may have to pay premiums for mortgage indemnity guarantee, mortgage protection insurance and mortgage payment protection insurance.
Mortgage indemnity guarantee (MIG)
This is sometimes called a mortgage insurance premium (MIP). This covers the lender if you don't pay off your mortgage. If this happens, your insurer will pursue you for the money they paid to your lender. You will probably have to take out a mortgage indemnity guarantee (MIG) if you are borrowing 90% or more of the value of the property.
Mortgage protection insurance
This is life insurance that pays off your mortgage if:
- you die,
- your partner dies, if you have a joint mortgage together.
It's important to get mortgage protection insurance if you have a joint mortgage or a dependent who would need to go on living in your home if you die. You may not need this sort of insurance if neither of these things apply. Interest-only mortgages already include life cover.
Mortgage payment protection insurance
This is different from 'mortgage protection insurance' described above. It Is cover which 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 you if:
- you are self-employed,
- you work part-time,
- you are a contract worker.
This is sometimes called 'Accident, sickness and unemployment insurance'.
Mortgage payment protection insurance policies are quite expensive. Most will not pay out until a few months after you are unable to work. The policy will usually only pay out for a year or two. Whether you need this kind of cover may depend on:
- your saving,
- your other asset.
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