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Mortgage Insurance??

1K views 61 replies 12 participants last post by  Meulen 
#1 ·
I moved into my first house last December, and my wife and I are both on the mortgage. Since we moved in we began to receive a steady stream of mortgage insurance advertisements via mail. Well, after talking with my wife we thought this would be a good idea (incase something happens to one of us, and the other can't afford the mortgage alone), so I sent in to meet someone. Met with them and got some numbers and what not yesterday, but I want to make sure that im not getting ripped off or anything, or if I really even need this stuff. Note: This is not PMI. This is a policy that pays the spouse if the other dies.

Anyone else have this? Am I falling for some sort of scam?
 
#2 ·
I would make sure that you work with a refutable company. Other than that, this is not a scam and it is probably a very worthwile policy to have. Most people either get additional mortgage insurance, or they increase their life insurance coverage to cover the home as well.

A mortgage insurance policy can be set up for both short and long term. Meaning, if one of you gets injurred and is off work for a while, the payments will be made on your behalf through the insurance company. The long term aspect of it is in the event that one of you passed away. In that case, the loan balance is paid off. It is a good idea to have this type of policy to protect your loved ones. Should you/they pass away, the home is paid for and the life insurance money can be used to help them survive. If you dont have this, life insurance money goes to paying this bill and the quality of life for your loved ones could be seriously impacted.

Depending on your loan amount, you may also be able to get this through your mortgage company. This varies depending on a number of factors, but I do know that some financial service/insurance companies can handle it together (as opposed to seeking 3rd party).
 
#3 ·
I'm no expert on this specialized risk type of insurance but my general guess is that if you're in good shape with life insurance the mtg payment becomes a non-issue should one of you pass.

My other guess is that monies directed towards life insurance will be of better long term benefit than insurance which soley covers your mortgage. Unless you move or refinance often, at some point you will have a home that is free & clear. At that point the mortgage insurance is of no help to you where a life policy still would be.

I'd even venture to guess that money invested wisely will benefit you more in the long run than the same amounts directed at this type of insurance.
 
#6 ·
I disagree with this statement. If you work with a company like State Farm or Country Companies, this policy will not cost you very much a month. Like a car or bike loan, the insurance is specific to the property that you live in. If you move, you adapt the policy for the new home. If the home is free and clear, there would be no need for this type of policy. Stating that they are a recent homeowner, they obviously have a mortgage left.

Life insurance is designed to help your loved ones once you pass away. You have to ask yourself what you really want them to be able to do with the money once you pass away. Your home is your biggest assest and your biggest liability. Look at you life insurance amount in relation to your mortgage balance. When you pass away, you want to help make sure that your bills are paid, and then there is enough money left over to help them survive comfortably. If you have a $200,000 mortgage, and you pass away, that is a lot of money that comes right off the top of what your loved ones have to use for survivorship. Factor in credit cards, loans, college educations, living expensese, etc... and a $300-500K life insurance plan does not look so comforting.

I would strongly advise spending the $20-30 a month and get the extra protection. Like all insurance, you take a gamble on whether or not you will need to claim it. However, your home is a big asset/debt and your family is incredibly important. I would not skimp on your protection here. Find what you can afford and do it.
 
#4 ·
9 times out of 10 a life insurance policy is less expensive
 
#9 ·
Life insurance should be term until you have enough of an assett base where it is not necessary. Your goals financially should allow you have investments that some day will cover any needs that life insurance and mortgage insurance normally would.
 
#10 ·
Pmi ...

PMI (private mortgage insurance) is a complete waste of money. Most lenders used to make you take it out, if your down payment on the house was less than 20%. To me, to pay PMI sounds like a penalty for not having a 20% down payment for a home.

To avoid PMI, take out what's called an "80-15-5" or "80-10-10" loan. For an "80-15-5" loan, you put down 5% at closing, and finance 15% using a HELOC (home equity line of credit), so in essence, you walk out of the closing paying 2 mortgages. But the advantage of having 2 mortgages is all the interest is tax deductible, whereas paying PMI is not. An "80-10-10" is the same thing, only you put down 10% at closing and finance 10% via a HELOC.

Don't waste your money: avoid PMI at all costs.
 
#12 ·
PMI (private mortgage insurance) is a complete waste of money. Most lenders used to make you take it out, if your down payment on the house was less than 20%. To me, to pay PMI sounds like a penalty for not having a 20% down payment for a home.

To avoid PMI, take out what's called an "80-15-5" or "80-10-10" loan. For an "80-15-5" loan, you put down 5% at closing, and finance 15% using a HELOC (home equity line of credit), so in essence, you walk out of the closing paying 2 mortgages. But the advantage of having 2 mortgages is all the interest is tax deductible, whereas paying PMI is not. An "80-10-10" is the same thing, only you put down 10% at closing and finance 10% via a HELOC.

Don't waste your money: avoid PMI at all costs.

Are you blind. He is not talking about PMI.
 
#11 ·
I'm sure there are Pro's and Con's to both. Learn as much as you can about the alternatives/products and once you've done that you'll be able to make an educated decision as to what will best suit your needs. I don't think there is a right or wrong answer here, it just depends there are many variables to take in consideration.
 
#13 ·
Shoot me a PM...I work for State Farm. We can take care of all your needs. And no, you're not falling for a scam, you're actually being quite mindfull by being proactive in caring about your family/home. Most people do not.
 
#15 ·
Good stuff guys. This is exactly what I was wondering. For the record...

-The plan presented to me yesterday does not necessarily need to be applied to the mortgage. It's paid out to the spouse to use at their discretion.

-It was a "return on premium" policy which states that we can always get the money back if we pay down the house. I.E. we will not always owe the amount we would currently be covered for so we can get it back. Not sure if Life Insurance policy would do this?

-It does seem to be based somewhat on health (there were health related questions)

-The number I got for a $300,000 policy, 30 year old male, non-smoker, zero health issues, was about $72 a month.

- That number includes a Waiver of Payment plan which basically says they will pay the plan for 18 months if I become disabled or something.


I need to look into how much it would cost to increase my life insurace policy to include the extra $300,000 from the sounds of it.
 
#18 ·
Hey Sean, is this for PMI?



:lmao: :jester


I'm glad people read posts carefully.


I would think you could get $300,000 in life insurance for less than $72 a month.
 
#20 ·
:laughing:

You guys may be right, and I will look into it ...BUT you won't ever get that life insurance premium back unless you die. This mortgage insurance sound like we can get the premium back as we pay down our mortgage.

I'll have to weight it all out i suppose. Cost of purchasing more life vs. cost of mortgage insurance and the option to get the premium back.


....i hate this shit. What was wrong with banging YWB's, and spending all my income on booze, drugs, and rent? Anybody want to remind me?
 
#27 ·
I can't talk PMI any more ... If I do, then MM Racing might call me something else besides "blind".
 
#30 ·
Another interesting thing ... I was told that a person in my current situation doesn't need ANY life insurance whatsoever.

It's because I'm an only child, unmarried, and the only beneficiary I'd otherwise have would be my parents, if I were to kick it before they did. So with no beneficiary I wouldn't need it.

I don't know if I fully 100% agree with that. I figure I won't be single all my life, so sooner or later I will have a beneficiary other than my parents.

A good experience for everyone to experience is to see an estate planner / lawyer, to work out everything. They think of stuff you wouldn't normally think of, and know best how to protect your estate.
 
#31 ·
This all boils down to personal preference and the particular scenario the person is dealing with. All the concepts in this thread- mortgage insurance, pmi, life insurance types- they are all good and bad depending on what the original goal in mind is.

Does anyone want to pay an extra $30-$150 a month in PMI- no. But then who want to pay 100% interest on their second morgage for 3-5 years until they refinance? It depends if you want a long or short term solution. Same w/ the whole vs term life insurance.

I think that for arguments sake, we need to agree to disagree here. What works for one may not work for all, and what works for most may not work for the individual.
 
#35 ·
Very true. This is one of those situations where you have to decide which sucks the least for you. Either way, you're paying something extra. It's that stupid 20% rule which started the screwing in the first place. Eliminate that, then this HELOC and PMI bullshit ceases to be an issue.
 
#38 ·
Arguing the "whole" vs. "term" is similar to the "traditional" vs. "roth" IRA. Ugh, that battle got bloody :)
 
#39 ·
this argument isn't anywhere close. Just go talk to your planner to see what I mean
 
#44 ·
I am referring to larger debts and obligations other than unsecured debts such as credit cards...

You are correct in your statements regarding debts being passed onto your estate. However, a growing trend for people is to use equity in their home to pay debts and pay off credit cards. From this perspective, it does still have an effect on your financial goals for those you love.
 
#45 ·
sorry, but I'm not following this. How is debt tied to your home hedged with life insurance protecting ones you love. If your house is sold as a loss the estate is in debt not your loved ones. Creditors are SOL. Unless you want to gift people your insurance policies it doesn't makes sense. In that case the planner is still right.....he doesn't need it, although may want it.
 
#46 · (Edited)
This is along the lines of what I am referring to:

"If you pass away and you have a very large amount of debt, the credit card company can assign this amount of debt to any and all of the names that appear on the card. The credit card companies do not get notified of a death of one of their clients. They just see it as an overdue bill and will pass this to their collection office when they notice that no one is paying. This is what happens all the time when it comes to unpaid credit bills. Most often, the credit card company can be contacted and notified of the situation and most but not all, cases are written off.

The very same thing can be said to land and homes that are left for family members. If there is an outstanding bill that is associated with an inherited house, you could easily be stuck paying. There are states that will waive debt owed by the deceased, but be warned that there are still some that do not. By law at the time of the reading of the will the creditor is entitled to one year to claim payment for a debt on an estate. You are also required to give the creditor notification so that they may waive the debt or place the bill on the heir. It is very wise for you to do this as soon as possible because if you wait too long they may see this as you trying to get out of paying this debt, and a fee that would have otherwise been waived is now yours to keep."

The logic built around this, whether single or married, is that it would still be wise to have a protection plan in place to pay off your crucial debts once you pass away. I will agree that it is not as important as if you were married or had kids, but that does not necessarily mean that a life insurance policy isnt a good idea for a single person. Again, it depends on what they want to accomplish.
 
#47 ·
This is along the lines of what I am referring to:

"If you pass away and you have a very large amount of debt, the credit card company can assign this amount of debt to any and all of the names that appear on the card. The credit card companies do not get notified of a death of one of their clients. They just see it as an overdue bill and will pass this to their collection office when they notice that no one is paying. This is what happens all the time when it comes to unpaid credit bills. Most often, the credit card company can be contacted and notified of the situation and most but not all, cases are written off.

The very same thing can be said to land and homes that are left for family members. If there is an outstanding bill that is associated with an inherited house, you could easily be stuck paying. There are states that will waive debt owed by the deceased, but be warned that there are still some that do not. By law at the time of the reading of the will the creditor is entitled to one year to claim payment for a debt on an estate. You are also required to give the creditor notification so that they may waive the debt or place the bill on the heir. It is very wise for you to do this as soon as possible because if you wait too long they may see this as you trying to get out of paying this debt, and a fee that would have otherwise been waived is now yours to keep."
Isn't that what I just said about having another name on the account?

As far as a home would you accept an inhertance that's in the negative? or would you will a debt ridden estate? I wouldn't, unless I wanted to pay the debt for sentimental reasons. This is refering to leins anyway. In which case the estate can sell the house payoff outstanding debt, if still in the neg Creditors are SOL period.

planner is still right....he doesn't need it
 
#48 ·
I think you guys were brain washed by an insurance salesman.:lmao: :lmao:
 
#50 · (Edited)
I think I lost you somewhere along the way here w/ the use of the home/estate as an example of the necessity for a single person to have a life insurance policy.

Let's look at it in a much simpler light. Say I am a single guy- no wife, no kids. My mother or grandmother has medical issues and has difficulty getting by on the social security, medicare, annuity, and any other income that she could get. Being a good son, I help her out w/ the bills. If I die, how does she get by? If I were to have a life insurance policy, despite being single, I would generate a revenue stream for her that would continue to give her a high quality of life. Simple example of a need, without the confusion of the transfer of debts and estates.

As I have said all along, it can be justified depending on the intentions and goals in mind of the person considering the policy.
 
#49 ·
Lot of good info here, in my situation I have one life insurance policy that will cover the mortgage, and I have another one that will cover everything else and leave my wife and child VERY conmfortable.

I also have long term and short term disablity through work that I pay a few bucks for, now there are laws that limit the amount of disability coverage you can take out as a percentage of your salary. But theres ways around that.

I have a policy through state farm that covers my montly mortgage payments and utilty bills if I am injured. Considering our hobbies all of these are good ideas.
 
#53 ·
wouldn't it be cheaper than getting a policy to not name me as an heir and let it go to probate?

furthermore if your estate is in the hole $50k or whatever after other creditors I don't want it and won't take possession
 
#56 ·
Estate planning is really maddening ... it's why no one WANTS to do it.
 
#62 ·
Today I think I gotta give it to you and xgamesboi.:lmao: :lmao:

good luck!!!
 
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