Should I Buy Mortgage Protection Insurance?

There are two types of mortgage insurance. With one, you might not have a choice as to whether you have it. Private mortgage insurance is insurance that will protect your lender should you default on your loan. If your down payment is less than 20 percent of your property’s value, you likely won’t have a choice about whether you have private mortgage insurance; it’s required. But with mortgage life insurance, you get to decide.

Private Mortgage Insurance

Private mortgage insurance is required in just about any circumstance in which more than 80 percent of the value of the home would be under a mortgage loan. Private mortgage insurance is there to protect the lender. The cost of private mortgage insurance is typically 0.5 percent of the amount of your loan.

Mortgage Life Insurance

Mortgage life insurance is a mortgage insurance that can protect you instead of your lender. This type of insurance covers the amount of your mortgage if you should die, obtain a disability, or acquire a debilitating illness.

In most cases it doesn’t make much sense to have mortgage life insurance. The chance that you will become unable to pay the mortgage is generally small. And if that happens, your family or the others in your household will have to find other ways to pay all the bills—not just your mortgage.

Instead, you may wish to consider disability insurance. Disability insurance would help you pay all your bills—not just your mortgage—should you become disabled. For about the same amount you’d pay to take care of your mortgage, you could pay an insurance premium to cover more of your expenses.

By C.L. Haehl

Mortgage Life Insurance Protection

Mortgage life insurance is an insurance policy taken out on the life of the homeowner who has obtained the mortgage. This mortgage life insurance policy is aimed at paying any outstanding mortgage debt upon the death of the insured. To protect their investments, many companies provide mortgage life insurance in association with an insurance company. This mortgage life insurance ensures that the balance mortgage is comes from the insurance company in the event of death of the borrower.

There are two types of mortgage life insurances that borrowers can opt for, namely decreasing term insurance and level term insurance. Borrowers can choose among these on the basis of the kind of mortgage they have obtained that may be a repayment mortgage or an interest only mortgage. Decreasing term insurance is exclusively created for the borrowers who have taken a mortgage. This is preferred by mortgage borrowers because as the balance on the mortgage decreases, the coverage also decreases. This makes sure that at any given time, there are sufficient funds to pay off the balance in case the borrower dies. Level term insurance is for borrowers who have an interest only mortgage. The sum of the coverage remains the same, as the principal never reduces.

Terminal illness benefits are included in both the types of mortgage life insurance to protect the borrowers against having to repay the mortgage in case of any terminal illness. Critical illness coverage is an option that can be added as an additional coverage along with the policy or even as a stand-alone coverage. This allows the borrowers to receive payments in case they are diagnosed with a critical illness. Mortgage life insurance offers protection against the survivors of the borrowers losing their homes, if they are unable to make the monthly payments.


By Peter Emerson


Check Out the Related Article : 10 Tips To Finding The Right Mortgage Loan Broker

Mortgage Insurance Rates

In order to secure themselves against potential default of mortgages, mortgage sellers adopt the policy of buying insurance policies. These insurance policies are mandatory for those mortgages in which there has been a down payment of less than 20%. The premiums over these mortgage insurance are generally passed on to the buyer of the mortgage, who pays it along with the monthly payments towards the mortgage. Such mortgages are also called BPMI, or Borrower Paid Mortgage Insurance. There is also another kind of mortgage insurance – the LPMI, or Lender Paid Mortgage Insurance. The conventional pattern is to go in for a BPMI.

Rates of mortgage insurance vary according to current situations. As in mortgages, the rates of the insurance also may be either fixed or adjustable. Fixed-rate mortgage insurance is constant for the entire life of the mortgage, while adjustable-rate mortgage insurance varies according to market fluctuations in rates.

Mortgage insurance rates also differ depending on whether they are BPMI or LPMI. There is not much difference in the numbers; the difference lies in who pays the premiums of the mortgage. In addition to all these factors, mortgage insurance rates also depend on the amount of mortgage coverage that the insurance provides. A greater coverage would be levied at a lower rate of insurance.

It is not easy to mention the rates individually, as there are a wide number of factors and statistics involved and they vary from day to day. However, any mortgage insurance company would be more than pleased to give a current list of the insurance rates if asked. It is highly necessary to know the current mortgage insurance rates while buying a mortgage, as typically it would be the borrower who would have to pay for it. Most borrowers neglect to ask the mortgage rates from their mortgage sellers, or they are simply misinformed. These are the people who later find themselves stuck in a rut of high monthly payments.


By Jennifer Bailey


Check Out the Related Article : Mortgage Protection

Mortgage Life Insurance

Mortgage life insurance repays the entire or most part of the mortgage, when the borrower becomes critically ill from disease or accident, or suffers from death. So, the mortgage life insurance protects the family, co-borrowers, or co-guarantors from repaying the entire mortgage.

Depending on the insurance policy, the insurance company pays for the entire mortgage or maximum amount. For example, the insurance company pays up to maximum of $600,000. If the mortgage went over the maximum amount, the insurance company repays the portion of the mortgage up to the maximum amount.

The borrower usually purchases home thru mortgage. It takes a huge amount income to pay off the mortgage. In case of critical illness, debilitating accident, or depressing death of the borrower, the family needs to replace the loss of income to pay off the mortgage. With mortgage life insurance, the family does not need to worry about repaying the mortgage.

Mortgage life insurance differs from private mortgage insurance also known as PMI. The PMI protects the mortgage lenders in case of default of mortgage payment. The mortgage lenders risk the inability to re-sell the property high enough to pay off the mortgage. When the borrower lacks enough money for twenty percent down payment, the mortgage lenders requires PMI. As soon as borrower pays off or the home equity reaches twenty percent, the mortgage lenders automatically cancel the PMI premiums.

Mortgage life insurance is voluntarily. It is the decision of the borrower to sign up for the mortgage life insurance. In order to see the need, the borrower must sit with a certified insurance agent. The insurance agent will analyze the overall financial picture of the borrower.

The insurance policy starts at the same day of the approval on mortgage. Even though the borrower has not paid the first mortgage payment, the borrower still gets the benefit.

As the borrower pays off the mortgage, the mortgage decreases. Naturally, the coverage decreases as well. When the borrower paid in full amount of mortgage, the coverage is gone. And, the borrower no longer needs to pay the premiums.

When the borrower engages in mortgage refinancing, the borrower needs to qualify to the new mortgage for mortgage life insurance again.


By Dennis Estrada