It is good to see mortgage completions rising again and the housing market becoming more buoyant. Elderly mortgage pundits like yours truly have seen it all before.
We remember what fuelled the depression in the market in the early 1990s, namely the many thousands of properties taken into possession by mortgagees flooding the market at low prices. As mortgage professionals we must avoid such circumstances in future.
The Mortgage Market Review (MMR) seeks to do just that by insisting that all applicants get professional advice. However, truly professional advisers will not merely consider the applicant’s disposable income to show affordability but will encourage clients to answer the ‘what if?’ questions thereby ensuring that the mortgage payments can be met both now and in the future.
The big question is what if your circumstances change and you can no longer afford the monthly payments? Crises occur in all lives rich, poor singletons and couples.
Untimely death being the obvious tragedy and easily financially protected by life assurance to cover the mortgage whether it be decreasing term to repay the mortgage balance or level term that may also protect other commitments. Life cover is perhaps not so important for the singleton with no dependants or indeed for a couple of high earners without children.
High earners may have sufficient resources to maintain mortgage payments, joint borrowers may be able to rely on a single salary but the singleton risks the loss of the home. If the borrowers have dependants then the loss of an income becomes a real disaster and again the home is at risk.
With very few exceptions borrowers need income protection so as to ensure the mortgage can be maintained in the event of failing health. Income protection products are not all the same. Premiums widely vary as does the extent of the cover. The choice of correct product is one that should only be the domain of professional advisers.
Diagnosis of a critical illness causing the borrower anxiety since his or her life may be cut if life cover is in place the financial consequences to dependants are covered bringing some comfort. However consider the plight of the borrower whose life is impaired by a critical illness. Many survive the first heart attack but are warned to change their lifestyles.
This is likely to mean a less pressured occupation that may result in lower earnings and therefore the original mortgage becomes unaffordable. A critical illness policy that will repay the mortgage on diagnosis protects the home giving the peace of mind required for a continued stress free life.
Getting the proper protection in place is just as vital to the financial wellbeing as arranging a suitable borrowing source. The MMR is correct in that the client needs the knowledge and experience of a qualified, experienced adviser to guide them through the product choices available to them to ensure that these ‘what if’ questions are considered and where necessary suitable cover is arranged. MMR should be welcomed, and it is hoped that it will ensure that borrowers receive the help they need not only to find the right mortgage but to ensure that they are always able to meet its payments.
Truly professional advisers will always seek to protect their client’s assets and it should be noted that we are not just enabling the purchase of bricks and mortar but protecting their families, dreams and aspirations too.
