Calgarypuck Forums - The Unofficial Calgary Flames Fan Community - View Single Post - House Appraisal before mortgage gets insured

MoneyGuy · 06-20-2006, 10:56 PM

[quote=tvp2003]Can you elaborate? Do you just mean getting a term life insurance policy? I'll have to dig out my dog-eared Wealthy Barber book to remind myself what the different types of insurance are...
[quote]

Okay, important mortgage insurance lesson here. Few people know this. The problems with mortgage insurance (these apply to just about all mortgage insurance policies I've seen):

1. Motgage insurance is not portable. If you sell and move, you can't transfer your mortgage to the new property. If you've developed health issues, you might not be able to get new insurance, which is actually unlikely (see #2).
2. Mortgage insurance is underwritten at the time of claim. That means that virtually everyone gets it as it's underwritten the same as group life insurance. If you're young, healthy and a non-smoker, you get the same rate as some old, unhealthy guy who smokes like a chimney. Being underwritten at the time of claim means that if you would not have qualified for insurance if it was underwritten at the time of application, then you can pay premiums for years and not even have the insurance you think you do. There will be lawsuits over this one day.
3. Mortgage insurance is more expensive than life insurance. How much depends on age, health, etc., but the difference can be substantial.
4. Think about this one. It's a deal killer for me. Mortgage insurance premiums don't decline as your principal declines. Example: You take a mortgage for $200,000. Fifteen years later your mortgage is $90,000 but your premium is the same. If you die, you're paying for 200K of insurance but guess what, the insurer pays out 90K, but not to your beneficiary, but to the lender. Bad deal.
5. You cannot actually get the money from your mortgage insurance policy. It goes to the lender, with no option on your part.

Buy cheaper, more flexible life insurance. If your mortgage is 200K, but 250k of term life insurance. The extra amount can be used as creditor insurance. If you even take a loan that requires insurance, you have it and you can refuse the crap that the banks sell as creditor insurance, with similar shortcomings as with mortgage insurance. If you die owing 90K, it will pay out 250K to your beneficiary, who then can decide what to do with the money - pay off the mortgage, educate the kids, deposit into RRSps, whatever.

Do not buy mortgage insurance. BTW, the banks won't tell you this. Oh, yes, mortgage is sold by unlicensed, unqualified bank drones. Tellk 'em to take a hike.

If more questions, post here or send me a PM or email. good luck.

BTW, I'm a certified financial planner.

06-20-2006, 10:56 PM	#25
MoneyGuy Franchise Player Join Date: May 2006 Exp:	Mortgage insurance is crap [quote=tvp2003]Can you elaborate? Do you just mean getting a term life insurance policy? I'll have to dig out my dog-eared Wealthy Barber book to remind myself what the different types of insurance are... [quote] Okay, important mortgage insurance lesson here. Few people know this. The problems with mortgage insurance (these apply to just about all mortgage insurance policies I've seen): 1. Motgage insurance is not portable. If you sell and move, you can't transfer your mortgage to the new property. If you've developed health issues, you might not be able to get new insurance, which is actually unlikely (see #2). 2. Mortgage insurance is underwritten at the time of claim. That means that virtually everyone gets it as it's underwritten the same as group life insurance. If you're young, healthy and a non-smoker, you get the same rate as some old, unhealthy guy who smokes like a chimney. Being underwritten at the time of claim means that if you would not have qualified for insurance if it was underwritten at the time of application, then you can pay premiums for years and not even have the insurance you think you do. There will be lawsuits over this one day. 3. Mortgage insurance is more expensive than life insurance. How much depends on age, health, etc., but the difference can be substantial. 4. Think about this one. It's a deal killer for me. Mortgage insurance premiums don't decline as your principal declines. Example: You take a mortgage for $200,000. Fifteen years later your mortgage is $90,000 but your premium is the same. If you die, you're paying for 200K of insurance but guess what, the insurer pays out 90K, but not to your beneficiary, but to the lender. Bad deal. 5. You cannot actually get the money from your mortgage insurance policy. It goes to the lender, with no option on your part. Buy cheaper, more flexible life insurance. If your mortgage is 200K, but 250k of term life insurance. The extra amount can be used as creditor insurance. If you even take a loan that requires insurance, you have it and you can refuse the crap that the banks sell as creditor insurance, with similar shortcomings as with mortgage insurance. If you die owing 90K, it will pay out 250K to your beneficiary, who then can decide what to do with the money - pay off the mortgage, educate the kids, deposit into RRSps, whatever. Do not buy mortgage insurance. BTW, the banks won't tell you this. Oh, yes, mortgage is sold by unlicensed, unqualified bank drones. Tellk 'em to take a hike. If more questions, post here or send me a PM or email. good luck. BTW, I'm a certified financial planner.