Protection Guide
Protection can appear daunting and complicated at times. There are many variables and different products involved. This guide will help you understand the basics of protection and can help you make a more informed decision to ensure that you and your family have the right policies in place should something unforeseen happen.
Who we work with
We work with a wide range of protection providers, ensuring you can get the right product to match your needs.
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Why use Rocket?
Options
We work with High St Insurers and Niche Providers.
Experience
Over 20+ Years of helping people just like you.
Price
Our Panel of providers ensures you don't over pay.
Service
We do our best to ensure you have a stress free experience.
Protection Jargon Buster
Decreasing Term
This is where the Sum Assured, decreases over time, typically used to match the mortgage debt that over time goes down as repayments are made.
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How much can I borrow?Generally-speaking, you may be able to borrow between three and four and a half times your salary. So, if you earn £30,000 a year, that means you could borrow between £90,000 and £135,000. But be aware that lenders decide how much they’ll lend based on your particular circumstances, such as your income and your outgoings. You'll need to be prepared for lenders to assess your bank statements to work out if you can afford a mortgage. Your credit score can also have a big impact.
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What is a standard variable rate?A standard variable rate (SVR) is an interest rate set by your mortgage lender that you’ll usually move to when your current mortgage deal ends – unless you take out a new deal. Unlike a fixed rate mortgage, an SVR can change, which means your monthly payments could go up or down; your lender will always notify you of a change before it happens. An SVR is usually more expensive than other mortgage deals. But, early repayment charges may not apply, allowing greater flexibility to make overpayments. Check with your lender before making an overpayment. If you don’t want to move to an SVR, you’ll usually have the option to switch to a new deal or remortgage to a different mortgage provider.
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What does a decision in principle mean?A decision in principle shows what a lender could be prepared to lend you. It’s also known as a mortgage in principle or an agreement in principle. It’ll give you an idea of what you can afford – handy for when you start house hunting. However, you have to complete a mortgage application form to secure a formal mortgage offer. That bit comes once you’ve found the home you want to buy.
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What is LTV ( Loan to Value)The loan to value – often shortened to LTV – is the size of the mortgage compared to how much your property is worth. It’s usually expressed as a percentage figure. For example, if a mortgage is offered at 90% LTV, you’ll need to find a deposit of 10%. The lower the LTV, the lower the mortgage interest rate tends to be.
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How much can I borrow for my Buy-to-let?With a buy-to-let you can borrow up to 75% of the property value. The mortgage amount is then dependant generally on two things: Anticipated rental income and your tax band. Being in a higher tax bracket will mean you can borrow less this only applies for those looking to purchase in their personal name. Lender will then assess the rental income in connection to the property value to see if it passes their ICR ( Income Cover Ratio ) which is a stress test that they use to see if the rent is high enough.
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Interest only or Repayment for my Buy-to-let?Interest Only mortgages have for a long time been popular with Buy-to-let Investors. The lower monthly repayment can allow Landlords to generate cash flow each month which can then be used to build a deposit for another property purchase. Inflation will overtime erode the loan amount and Landlords will benefits from the assumed increase in property value. Repayment Mortgages don't offer as much surplus cash flow each month but are still a fantastic option. Slowly building equity in the property each month is a fantastic way to generate capital. Both options make sense, but are dependant on your personal circumstances.
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Are Buy-to-let Mortgages more expensive?Compared to a residential mortgage buy-to-let mortgages are generally higher in interest rates and in fees. This is due to the risk associated with the type of borrowing. Buy-to-let Mortgages Inherently have a higher risk for lenders due to the fact that it is not the borrowers main residence, and due to tenants not paying their rent. Borrowing through a limited company is eve more expensive compared to a buy-to-let in personal name and residential mortgage, for the same reasons above.
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Is it better to borrow in Limited Company or Personal Name for Buy-to-let?This depends entirely on each individuals circumstances and we would always recommend independent tax advice, if I need click here. Borrowing through a limited company is more expensive than borrowing in ones personal name and will generally have higher product fees. Having a limited company will involve set up costs and on going accountancy fees. The greatest benefit of borrowing in a Limited Company is because you can deduct interest payments as a tax expense, reducing your tax bill. Borrowing in your personal name, could mean better rates, less fees but could also result in you paying more in tax if it changes your tax rate. For example if someone had an Income of £35,000 from their employment, and then had a rental income of £20,000 their total income would be £55,000 moving them from a basic rate tax payer paying 20% to a higher rate tax payer paying 40%, a huge difference.
Different types of protection.
There are many protection policies available see below the different types of cover availble.
Critical illness cover is an insurance policy that provides a lump sum payment if you're diagnosed with a serious illness.
Life cover is an insurance policy that pays out a lump sum to your loved ones if you die during the term of the policy.
A policy provided by an employer that offers protection such as life, income, or critical illness cover to a group of employees under a single plan.
Protection Basics
There are many types of protection and it can often seem like an endless confusing list of products, but choosing what is needed for you doesn’t need to be a complicated task.
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The first thing to consider is what needs to do you have to be protected? Do you have a mortgage, do you have an income, would you children be affected should the worse happen to you?
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This is something that we often avoid to think about, but it is something that is necessary in order to determine what is important for us.
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All policies have the same aim, and that is to mitigate the harm done from any unforeseen circumstances in life, we never know what is around the corner, which is why it is important to look at policies that can help should the worst happen.
Policies often also come with additional perks such as access to private medicinal advice a video GP and many more depending on your chose provider.
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If you would like a free no pressure conversation on protection please call us on:
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