October 10, 2013
Mortgage insurance (different from home insurance) is a poor option that should be avoided. Why? Other options?
Mortgage insurance (different from home insurance) is a poor option that should be avoided. Why? Other options?
They are costly, might not be tax deductible, if you die your next of kin gets nothing, and it is insurance that is difficult to cancel. There is a “piggyback alternative”. Piggyback loans feature the ability to avoid private mortgage insurance (PMI) when the down payment or equity in your home is less than 20% of the value. By combining a first mortgage and a piggyback second mortgage, you may reduce your monthly payments below a traditional mortgage loan with PMI.
You make many fine points, Alex. Let’s recap.
Mortgage insurance pays off your mortgage when you die. Sounds good, right? It’s not. It is expensive and provides little in the way of options if you pass. It also shrinks by each passing year as the equity in your home builds. DO NOT BUY THIS EXPENSIVE AND UNNEEDED POLICY.
If you are concerned about the debt on your home if you pass, get an inexpensive term life policy at a clearinghouse online. Accuquote.com and Term4sale.com are two. The policy pays the people you leave behind, not the mortgage company. This gives them the option of paying off the house, paying part of it off, or not paying it off at all while managing that money differently as your love ones plan your life after you have passed. A term policy provides that kind of flexibility. A mortgage insurance policy does not. Knowledge is POWER!!!!!!!