Donna Reyes

How do you make sure your mortgage is paid?

A young professional asked me this question as he and his wife prepare to buy a home.

First, there is what is called Mortgage Protection Insurance, which would pay for your monthly mortgage for a specific period of time (6-12 months up to a certain ceiling) in the event of job loss or loss of income. You have to buy it while you are employed and have a stable occupation (not self-employed). The premiums are based on the mortgage balance, home value, and your health and age.

Mortgage Protection Insurance policies are rare and there are few companies who offer them.

Second, consider getting Disability Insurance, which will help if you are not able to work and earn an income. You might already have short- and long-term disability insurance as part of your benefits at your job. Long-term disability insurance pays up to 50-60% of your salary if you're unable to work. If your employer pays 100% of your disability insurance premiums, you might get taxed for it when you receive the benefits. You could also consider getting your own disability insurance (outside of your employer).

Third, definitely get your own life insurance policy apart from what your employer gives you. The life insurance coverage you get from your employer is only available while you work for them. If you get laid off, that goes away. At least get a policy that will cover for the mortgage and have peace of mind that the house will be paid for and no one is stuck with the mortgage, should anything happen.

April is financial literacy month. I hope this bit of information helps you.



PS - We also offer daily workshops on personal finance. Our company offers them for free as a public service. Just send me a message if you’re interested and I will register you.