Mortgage Life Insurance

Mortgage life insurance is really a specialized form of life insurance. What mortgage life insurance promises is to pay the balance of your mortgage in the event of your death.

While this is generally an over-priced form of life insurance, it can be a godsend if you find yourself unexpectedly needing it. I know this situation from experience. When I was 21 years old, my father died very suddenly. His death was completely unexpected; he had been in good health up to that point. So, without warning, my mother was a young widow of 42. I was in college at the time, and my two younger brothers were still in high school. My mother had to become the family breadwinner literally overnight.

Fortunately, although my father did not have enough other life insurance, my parents had taken out mortgage life insurance through the bank that they dealt with. When my father died, the mortgage was automatically paid off. That action was probably the difference between my mother being able to make it financially, and having us all in a dire financial situation.

Having said that, this insurance is generally a consumer rip-off. For the dollar amount of the benefit versus the dollar amount of the premium it is one of the most expensive insurances you can buy. Further, you will continue to pay the same premium while the amount of your mortgage is dropping. This means that you are paying the same money for a decreasing benefit!

However, it's better to have some life insurance than none. If you have some reason that you can't qualify for inexpensive life insurance, you might want to take life insurance on your mortgage through your lender. In my experience, most lenders do not ask for physicals or health checks before giving this insurance.

So, you may find that it actually works for you and your family, if you have a medical condition that would otherwise preclude you from an amount of insurance equal to your mortgage. But compare prices with other life insurance (particularly term life insurance) before going this route.

In general, you should remember to avoid mortgage life insurance as long as you can get yourself sufficient life insurance at a good cost elsewhere. If you have term life insurance sufficient to cover your mortgage and all other debt through an insurance company you will likely get all the coverage you need at a better price.

Posted by TheBlogMachine.com at 9:24 PM EDT

Share This Post

Permalink

Mortgage Disability Insurance

Mortgage disability insurance is really a specialized form of disability insurance. What mortgage disability insurance promises is to make your mortgage payments in the event that you are disabled and cannot.

In my experience, mortgage disability insurance is generally a consumer rip-off. For the dollar amount of the benefit versus the dollar amount of the premium it is one of the most expensive insurances you can buy. On the other hand, your lender may offer it. Further, they may strongly encourage you to take it.

In general, you should avoid mortgage disability insurance. If you have other disability insurance through your work, or privately, you will likely get all the coverage you need at a better price. Further, with disability insurance you are only allowed to receive a certain amount of benefit (based on your salary at the time you became disabled). In most cases, the benefit is between 50% and 70% of your salary at the time you became disabled. Buying additional disability benefits will not result in more money to you. Your mortgage disability policy is likely to have a clause which prevents it from paying monies to you unless your other disability coverage is less than 50 % of your regular earnings.

Read all fine print carefully. Do not be fooled, even when this coverage is recommended to you. If you can get disability coverage through your work it is a better deal, dollar for dollar.

If you have no other disability insurance this may be a product for you. However, be sure to check all the details of your policy and ensure that the price is right with some comparison-shopping.

Posted by TheBlogMachine.com at 9:24 PM EDT

Share This Post

Permalink

Mortgage Insurance

There are a variety of mortgage insurance products on the market. Some of these products claim to help you to save for a home. Some of these products are geared to make your payments in the case of disability, ill health or death.

In most cases, if your lender offers you mortgage insurance, it will be a type of mortgage life insurance. This insurance will ensure that your mortgage is paid off in the case of the death of you or your spouse (as long as you are both named on the mortgage itself.)

In general, you will get a better deal on this kind of insurance if you buy it from an insurance company directly. The insurance packages that are offered to you by your lender are normally a more expensive insurance with lesser benefits. So, although your lender may try to talk you into life insurance for your mortgage, you are better off to say no.

Frankly, the kind of mortgage life insurance offered by your lender can be more than 3 times as expensive as buying a term life insurance policy for the same amount and the net effect is the same: You will have the money to pay off your home in the case of a death. However, if you have to buy additional insurance for both of you in order to fully ensure your home in case of death, you should compare the costs of two life insurance policies against the cost of the single insurance through your lender.

What if you have a bad credit history and your lender insists on insurance as a condition of your loan? Then, you may have to take the insurance. However, this insurance is likely to be different than mortgage life insurance. In all likelihood, this will be private mortgage insurance, and you'll usually be required to get it if you don't have a full 25% down for your home. Now while this kind of insurance may allow you to buy your home, it is an additional cost and it will not benefit you.

You are taking out insurance that will benefit your lender, in case you default on the mortgage. This provides your lender with greater security, and may allow you to get a mortgage that you wouldn't otherwise be able to get. However, as soon as you can, renegotiate to get rid of this insurance. It is pure overhead for you.

Posted by TheBlogMachine.com at 9:17 PM EDT

Share This Post

Permalink

Private or Personal Mortgage Insurance

Surely you've noticed that it seems to take longer to save a down payment than it did for our parents or grandparents? There's a reason for that. Relative to the growth in home prices over the last quarter century, Americans are earning less and, as a result, saving less. And as the prices of homes go up the size of the down payment needs to be bigger, not smaller.

Enter mortgage insurance. It is sometimes called private mortgage insurance or personal mortgage insurance. Mortgage insurance allows you to get a mortgage with less than 20 percent down. This means you can buy that house now rather than wait until you save up enough.

As a result, mortgage insurance has become very popular. The government reports, that in 1994, nearly one of every two home buyers obtained a low down payment loan and many of them used private mortgage insurance to realize their home ownership dream.

Still, you probably don't know much about mortgage insurance. Most people don't. Private mortgage insurance, is insurance that actually protects the lender. Many lenders will require private mortgage insurance on a mortgage because the less money that a buyer has invested in a home, the greater the chance that they default on the loan. Private mortgage insurance becomes a financial guaranty that protects lenders against loss in the event you default.

Without mortgage insurance lenders will typically require a down payment of at least 20 percent. So, if you don't want to have to keep saving while the cost of houses goes up private mortgage insurance might be a good solution for you.

By going with mortgage insurance, first time home buyers can increase their buying power. For example, $10,000 constitutes a 20 percent down payment on a $50,000 home. However, with mortgage insurance, that same $10,000 can also provide enough financial leverage to help you buy a $200,000 home with only five percent down.

This is the true value of private mortgage insurance.

Don't confuse private mortgage insurance with mortgage life insurance. Private mortgage insurance puts people in homes; mortgage life insurance pays all or a portion of your mortgage in the event of your death.

Posted by TheBlogMachine.com at 9:05 PM EDT

Share This Post

Permalink