Home Loan Tips:
Homeowners should not over look the importance of cover their home loans, while homeownerâ€™s insurance covers he costs of repairs to the property or replacement in the event of structural damage, mortgage insurance should settle the balance owing on your home loan if the borrower dies or is permanently disabled.
“Failing to take out such life cover can have disastrous consequences,â€ says Willie Lategan, MD of ABSA Life. â€œThere have been cases where the families of borrowers who died without this cover had to evacuate their houses and find alternative accommodation, because they could not afford the repayments on the bond.
“Although the property secures the bank’s risk, in the event of default due to death or disability, the family may end up homeless if the borrower’s whole debt is not settled, or a new loan is not taken up by the family.”
Advantages of Home Loan Insurance:
*The proceeds can only be used to settle the outstanding balance of the loan, so there is no danger that they will be used by the family or the estate to settle other debts or buy luxury items;
*Any other life cover that the borrower may have will be fully available to generate an income for the family after the loss of a breadwinner;
*Some mortgage protection policies even insure a bondholder against temporary disability and retrenchment by paying the bond installments for a specific period, should the insured event occur; and
*The customer can usually pay annual premiums for mortgage insurance. This ensures that the premiums are always up to date, and reduces transactional fees.