If your property portfolio is performing well, you might feel secure. But do you have a back-up plan?
With the average mortgage in Australia continuing to rise, buying a property today isn’t just about securing a nice big loan approval.
Getting the loan approved is only one part of the process. The second most important aspect is protecting it should an unfortunate incident occur, like a major accident, terminal illness or death.
It continues to astound me how many new homeowners and property investors take out a loan without asking: “How will my loved ones take care of the mortgage if something happens to me?”
It took me back to a time in my early lending career where I was chasing arrears as a collections officer. An upset lady called me as she had received one of my arrears notices about being behind on the mortgage repayments. I discovered she had lost her husband three months ago in a work accident. It was his income alone that had been servicing the loan.
Beginning to think the worst, she thought she would have to sell the house as that would have been the only way to make the repayments.
Fortunately this wasn’t the case, for one important reason. We discovered he had taken out MPI (mortgage protection insurance). In this particular case, it meant the house could be paid out fully and they could stay in their home – what a world of difference to a widowed young mother and two children!
And for me, I was able to comfort her by saying: “Don’t worry about the mortgage. That is all covered and you will be OK.”
Mortgage protection insurance means peace of mind
The job of a good mortgage broker or financial adviser is to protect you. It is that simple! And in the fast world we live in, many lenders are skipping part of the conversation of what would happen if the loan cannot be serviced.
And as a property investor, it’s sometimes easy to get consumed with your primary goal of getting that loan approval so that you can own one, two or multiple properties.
Now, you may also be lucky enough to be renting some of these properties to help service the loan. However, if your wages or salary are also needed to meet those loan commitments, then that’s when it becomes essential to pause and force that conversation with your financial adviser on what would happen if you lost your job, or something worse happened – a serious accident, disability or death.
Ask yourself the following questions:
- What would the loan shortfall be without my income?
- Would it mean an inability to service the loan?
- Could the bank foreclose on the property?
- Will the property have to be sold?
- What would it do to those around me left with this debt?
By taking out appropriate mortgage protection insurance you have the peace of mind of knowing your loved ones are taken care off and:
- Won’t suffer financial hardship related to the loan
- Have less emotional stress to deal with
- Will have a roof over their head if something terrible happens.
It’s one dream to acquire wealth through property for your family’s future, so don’t let this be destroyed by not protecting it.
Martin Rambow is founder of Finance for Life and a Tradebusters Connect Top 3 Local Business Pick.
A career banker, Martin began his career in 1975 as a junior banking officer, and he served his apprenticeship by working in all areas of retail banking. After rising to senior management level, Martin left the bank to incorporate his own financial services company in 1990.
His visionary approach toward banking led him to develop Finance For Life, which has evolved to become a broad and far reaching financial services provider that covers all personal and business financial requirements from home and business loans to retirement planning.