Home loan insurance 'important as interest rates rise'

Mortgage holders worried about defaulting on their repayments should consider purchasing home loan insurance, an expert has said.

Lisa Montgomery, head of consumer advocacy at Resi Mortgage Corporation, told News Limited that many people are unaware of the types of insurance policies that can help pay their mortgages if they
lose their job or cannot work because they are ill or injured.

She said that in their haste to secure a home loan, many property buyers ignore the issue of insurance.

"That could be an expensive mistake especially with repayments on the rise," added Ms Montgomery.

News Limited set out the range of insurance options that are relevant to home loans, including income protection insurance, which pays out a proportion of an income if illness or injury prevents a person from working.

Mortgage protection, meanwhile, is a hybrid of income protection insurance and life insurance, paying out when a person is ill or dies.

Rising prices and the reduction of government support measures have prompted Aussies to compare home loans in search of the best financing options. Yesterday Westpac said that funding problems had forced it to shut down part of its RAMS home loans business, reducing the availability of its mortgages.

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