Mortgage, Mortgage Life Insurance and General Debt Management

Posted by:  Financial Planner  on 7 Jun, 2011

Debt – it’s a rather large term that covers a broad range of topics. Trying to hone in on a definition is difficult at best. But, to put it in very general terms, debt is an amount that is owed to a person or entity. Though a debt can be a more abstract concept, in this regard, we are speaking of money or other assets of physical, tangible worth.

Debt can be incurred by an individual (or company) in many ways, though for the most part, it’s accumulated through credit cards or loans (such as mortgages). Loans occur when a creditor agrees to let a person or entity borrow a sum of money, to be repaid with interest (a fee assessed depending on the length of time between granting the initial loan and repayment of said loan). Credit cards are a controlled form of loaning money, in which a person or entity is given the card to use for purchases, the balance of which is paid off (also with interest) over a specified course of time.

Debt management is an extremely important part of one’s overall financial plan, as it’s easy to let it spiral out of control. Keeping track of all loans and credit cards (and limiting their use as much as possible), while making sure to make payments on time, is crucial to keeping control of your financial plan (and your credit score).

Savings will also be an important part of your financial planning and debt management goals. Life is unpredictable, and you never know what it’s going to bring your way. So making sure you have adequate financial padding in any event is incredibly important for you and your family.

Mortgages (or mortgage loans) are a specific type of debt that is used to help a person or entity purchase real estate. Financing a home through a mortgage is very common. In regards to repayment, interest rates are also assessed during the duration of the loan (generally set at 30 years). If the loan is not repaid, or a person/entity begins to default on their loan, then their property will be foreclosed upon, or seized by the bank or company offering the mortgage loan.

But what if someone passes away before they are able to repay their mortgage loan? That is when mortgage life insurance comes into play. A mortgage life insurance policy is taken out by the person in charge of handling the mortgage loan. In the event of their death, the policy will take care of mortgage loan repayment, so that the family is not burdened by that sudden expense (in addition to other financial losses and expenses that happen with death).

If you need further guidance or explanation about debt management, mortgage loans, or mortgage life insurance policies, reach out to us for advice. We can help advise you on matters of purchasing the right life insurance for you, and offer expert insight into how to regain control of your debt and finances.