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post #1 of 62 (permalink) Old 08-27-2008, 11:54 AM Thread Starter
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Mortgage Insurance??

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?

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post #2 of 62 (permalink) Old 08-27-2008, 12:03 PM
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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).
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post #3 of 62 (permalink) Old 08-27-2008, 12:04 PM
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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.
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post #4 of 62 (permalink) Old 08-27-2008, 12:05 PM
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9 times out of 10 a life insurance policy is less expensive

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post #5 of 62 (permalink) Old 08-27-2008, 12:07 PM
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I'm in agreement that you'd be better off with a life insurance policy.

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post #6 of 62 (permalink) Old 08-27-2008, 12:12 PM
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Quote:
Originally Posted by Troy View Post
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.
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.
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post #7 of 62 (permalink) Old 08-27-2008, 12:13 PM
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Quote:
Originally Posted by Troy View Post
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.
+1 Agreed!

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post #8 of 62 (permalink) Old 08-27-2008, 12:13 PM
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Not to mention that life insurance is based on your physical condition, age, etc. Mortgage insurance is not.
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post #9 of 62 (permalink) Old 08-27-2008, 12:22 PM
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Originally Posted by TDaytona650 View Post
Not to mention that life insurance is based on your physical condition, age, etc. Mortgage insurance is not.
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.

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post #10 of 62 (permalink) Old 08-27-2008, 12:24 PM
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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.

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post #11 of 62 (permalink) Old 08-27-2008, 12:26 PM
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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.

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post #12 of 62 (permalink) Old 08-27-2008, 12:27 PM
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Quote:
Originally Posted by xgamesboi View Post
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.

Ian
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post #13 of 62 (permalink) Old 08-27-2008, 12:27 PM

 
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Quote:
Originally Posted by MoTo178 View Post
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?
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.
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post #14 of 62 (permalink) Old 08-27-2008, 12:33 PM
 
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Quote:
Originally Posted by xgamesboi View Post
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.
You could get a 0% down USDA loan with no PMI too, then you wouldn't have to worry about taking out two mortgages.

back on topic, I second the life insurance over mortgage insurance, but this is also the first I've heard of that too.
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post #15 of 62 (permalink) Old 08-27-2008, 12:33 PM Thread Starter
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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.

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post #16 of 62 (permalink) Old 08-27-2008, 12:35 PM
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Quote:
Originally Posted by MoTo178 View Post
I moved into my first house last December, and my wife and I are both on the mortgage.
That's still wierd to see EMR represented like this... Sad really. It's a new generation.

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post #17 of 62 (permalink) Old 08-27-2008, 12:36 PM Thread Starter
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Quote:
Originally Posted by SuperSpud View Post
You could get a 0% down USDA loan with no PMI too, then you wouldn't have to worry about taking out two mortgages.
Quote:
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.
This is not PMI. PMI protects the lenders. This is for my spouse.

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post #18 of 62 (permalink) Old 08-27-2008, 12:39 PM
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Hey Sean, is this for PMI?






I'm glad people read posts carefully.


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

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Quote:
Originally Posted by SuperSpud View Post
You could get a 0% down USDA loan with no PMI too, then you wouldn't have to worry about taking out two mortgages.

back on topic, I second the life insurance over mortgage insurance, but this is also the first I've heard of that too.


so what's PMI again?
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post #20 of 62 (permalink) Old 08-27-2008, 01:12 PM Thread Starter
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Hey Sean, is this for PMI?






I'm glad people read posts carefully.


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


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?

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post #21 of 62 (permalink) Old 08-27-2008, 01:17 PM
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Quote:
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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.
For life insurance, go for whole life, not term. With term you will NEVER get your money back. Whole life accrues a value you can borrow against in the future if you have to.

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For life insurance, go for whole life, not term. With term you will NEVER get your money back. Whole life accrues a value you can borrow against in the future if you have to.

I'm doing really good typing for a blind guy, ain't I? hehe

BIG mistake...... term is much cheaper compared to what you can get back from whole life and the opportunity cost your paying for. I've never run numbers ands seen otherwise yet

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post #23 of 62 (permalink) Old 08-27-2008, 01:25 PM
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Who is ready to talk PMI now?!
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post #24 of 62 (permalink) Old 08-27-2008, 01:25 PM
 
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BIG mistake...... term is much cheaper compared to what you can get back from whole life and the opportunity cost your paying for. I've never run numbers ands seen otherwise yet
+1 I got suckered into the whole life thing once. When another parntership disolved I gave up my interest in that policy. It's much more cost effective to spend $10 a month for a couple hundred thousand $ term life insurance than it is to spend a hundred every month on whole life.
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post #25 of 62 (permalink) Old 08-27-2008, 01:30 PM
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BIG mistake...... term is much cheaper compared to what you can get back from whole life and the opportunity cost your paying for.
Yes, term is cheaper, but for a very BIG reason. Term is shit insurance:

- Term accrues no value, and if you cancel the policy, or if THEY cancel you, you get NO money back. Whole accrues value the whole time you carry it and becomes something that adds to your net worth.

- If you take out a 20 year term policy, and don't die in those 20 years, you get NONE of your money back. With whole, you would get money back, plus whatever the policy earned over the 20 years.

- You cannot borrow against a term policy. With whole you can.

Term is really only good for short covering. It's good for "in case shit happens" in the next couple years, but the longer you carry it, the more money you are wasting. It's better to think long term and go with a whole.

Term insurance is kinda like "leasing" a car or paying rent. You make monthly payments, and at the end of the lease, you still don't own the car or own the house you were renting, and all you accomplished was to help make someone else rich.

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post #26 of 62 (permalink) Old 08-27-2008, 01:34 PM
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Quote:
Originally Posted by xgamesboi View Post

Term is really only good for short covering. It's good for "in case shit happens" in the next couple years, but the longer you carry it, the more money you are wasting. It's better to think long term and go with a whole.

Term insurance is kinda like "leasing" a car or paying rent. You make monthly payments, and at the end of the lease, you still don't own the car or own the house you were renting, and all you accomplished was to help make someone else rich.
This should've changed your mind on your thinking right there. Life insurance should be short term. As I've said before, at some point you shouldn't need it at all(realistically before you retire). If you ever check the returns on your whole life policy and weigh it against your lost opportunity cost vs. "wasting" your money on term, you'll see what I'm saying.

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post #27 of 62 (permalink) Old 08-27-2008, 01:36 PM
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Originally Posted by TDaytona650 View Post
Who is ready to talk PMI now?!
I can't talk PMI any more ... If I do, then MM Racing might call me something else besides "blind".

Dante: [to Randal] You never go ass-to-mouth!
Randal: [to Dante] Would you grow up!
Becky: [to Dante] OK, I'm only telling you this because we're friends, but sometimes, in the heat of the moment, it's forgivable to go ass-to-mouth.
Randal: [chuckling] Ha! I knew it.
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post #28 of 62 (permalink) Old 08-27-2008, 01:40 PM
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This should've changed your mind on your thinking right there. Life insurance should be short term. As I've said before, at some point you shouldn't need it at all(realistically before you retire). If you ever check the returns on your whole life policy and weigh it against your lost opportunity cost vs. "wasting" your money on term, you'll see what I'm saying.
It's a complicated thing to work out, that's for sure! There's no easy answer, especially with life insurance.

If you happen to live beyond 20 years, and you have a term policy, then, you will have nothing at the end. If it's whole, then you stop paying premiums at the 20 year mark, and you get the full coverage benefit when you do finally kick it.

If you happen to kick it next week, then it really doesn't matter which one you have, term or whole.

If you think long term benefit, go with a whole. If you think short term benefit, then go with a term.

Dante: [to Randal] You never go ass-to-mouth!
Randal: [to Dante] Would you grow up!
Becky: [to Dante] OK, I'm only telling you this because we're friends, but sometimes, in the heat of the moment, it's forgivable to go ass-to-mouth.
Randal: [chuckling] Ha! I knew it.
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post #29 of 62 (permalink) Old 08-27-2008, 01:43 PM
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Originally Posted by xgamesboi View Post
It's a complicated thing to work out, that's for sure! There's no easy answer, especially with life insurance.

If you happen to live beyond 20 years, and you have a term policy, then, you will have nothing at the end. If it's whole, then you stop paying premiums at the 20 year mark, and you get the full coverage benefit when you do finally kick it.

If you happen to kick it next week, then it really doesn't matter which one you have, term or whole.

If you think long term benefit, go with a whole. If you think short term benefit, then go with a term.

If you say so. I've never had any financial planner or financially knowledgeable person tell me whole life was a good idea. There are too many better options for short term benefit

Brian (F.K.A. Crazy)

Gamertag: CRAZY403


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post #30 of 62 (permalink) Old 08-27-2008, 01:47 PM
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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.

Dante: [to Randal] You never go ass-to-mouth!
Randal: [to Dante] Would you grow up!
Becky: [to Dante] OK, I'm only telling you this because we're friends, but sometimes, in the heat of the moment, it's forgivable to go ass-to-mouth.
Randal: [chuckling] Ha! I knew it.
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