Losing your job or being signed off sick is stressful enough. Add a monthly mortgage payment on top and a tough situation can quickly turn frightening – especially with the cost of living still biting here in Lowestoft and across East Anglia.
So what actually happens to your mortgage if your income suddenly stops? And could mortgage payment protection insurance (MPPI) keep a roof over your head while you get back on your feet? Here’s a plain-English guide.
What happens to your mortgage if you lose your job?
Nothing changes about the mortgage itself – your lender still expects the same payment, on the same day, every month. What changes is your ability to pay it. If money stops coming in and you have no other cover, you’re relying on savings.
Miss a payment and the consequences build quickly: late fees, arrears on your account, and a mark on your credit file that can make future borrowing harder and more expensive. Left unaddressed, persistent arrears can ultimately lead to repossession – though that is always a last resort, and lenders are required to work with you long before it gets there.
The single most important thing is to talk to your lender early. Under the Mortgage Charter, most major lenders offer temporary options such as a switch to interest-only or a longer term to reduce payments. But these are stop-gaps – which is where dedicated cover comes in.
What is mortgage payment protection insurance (MPPI)?
Mortgage payment protection insurance is a policy designed to pay you a monthly, tax-free benefit if you can’t work because of accident, sickness or unemployment (often shortened to “ASU”). The benefit is intended to cover your mortgage payment – and sometimes associated costs such as buildings insurance or service charges – so the home stays safe while you recover or find new work.
It’s short-term cover: payouts typically run for 12 to 24 months per claim, giving you breathing space rather than a permanent income.
What does MPPI cover?
You can usually tailor the policy to the risks that worry you most:
- Accident & sickness cover – pays out if illness or injury stops you working. This is the “sickness cover for mortgage” element people most often ask us about.
- Unemployment cover – pays out if you’re made involuntarily redundant. Sometimes bought on its own as mortgage unemployment insurance.
- Full ASU – combines all three for the broadest protection.
What MPPI doesn’t cover
Like any policy, the detail matters. Common exclusions and conditions include:
- Voluntary redundancy, or redundancy you already knew about when you took the policy out.
- Pre-existing medical conditions for the sickness element.
- A waiting (deferred) period – typically 30, 60 or 90 days before a claim pays out. Choosing a longer deferral lowers the premium.
- A back-to-work period you must satisfy before claiming, and a cap on the total benefit term.
- Special rules for the self-employed, where “unemployment” is harder to define – always check the wording.
How much does MPPI cost?
Premiums are usually priced per £100 of monthly cover and depend on your age, the size of your payment, the type of cover (accident and sickness tends to cost more than unemployment alone) and the deferred period you choose. The right structure can make a real difference to the price, which is exactly the sort of thing a broker helps you balance.
MPPI vs income protection vs other cover
MPPI is often confused with other policies, but they do different jobs:
- Income protection pays a percentage of your salary, usually until retirement or recovery – longer-term and broader than MPPI. See our guide to the different types of income protection.
- Critical illness and life cover pay lump sums on serious diagnosis or death – not month-to-month support.
Many households use a combination. The right mix depends on your circumstances.
Do you actually need MPPI?
Ask yourself how long you could keep paying the mortgage if your income stopped tomorrow. If you have 3–6 months of savings, generous employer sick pay, a redundancy cushion or a partner’s income to fall back on, you may already have a safety net. If you don’t – or you’re self-employed with no sick pay – the exposure is much greater, and MPPI is worth serious thought.
How Steel & Co. Financial can help
We compare accident, sickness and unemployment cover across the market and explain the small print in plain English, so you only pay for protection you’ll actually be able to claim on. Whether you’re arranging a new mortgage or reviewing the cover you already have, we’ll help you get it right.
Get in touch with our Lowestoft team for a no-obligation chat about protecting your home.
This article is for general information only and does not constitute personal financial advice. Please seek tailored advice for your own circumstances.