Announcement

Collapse
No announcement yet.

OT -mortgage insurance

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • OT -mortgage insurance

    I know lots of us on this bbs are mortgaged to the nuts, so I thought I'd share something I found out when I bought my new place in June last year.

    In Canada anyway, the banks offer mortgage insurance (good idea). The rates are reasonable, so most people take it right at the same time they sign all the documents for the mortgage.

    What I found out, is that the banks pay the remainder of the balance on the mortgage upon the death of the mortgage holder. So if you had a mortgage for $80,000, and managed to pay off half of it, the insurance would only pay the remaining $40,000. Your rates don't change. The monthly payments for insurance remain the same for the life of your mortgage.

    I went to my insurance company and asked if they could match the rates offered by the bank for mortgage insurance. The insurance company rates were about 15% less than the bank rates, and the policy pays the full amount of the original mortgage.

    So even if I manage to pay off most of the mortgage, the policy will still pay $80,000 if I croak.

    My insurance agent suggested that I contact my bank and ask questions about what the bank policy would pay and all this came to light. Pays to ask questions.

  • #2
    Mortgage insurance, otherwise know as PMI, or private mortgage insurance, is a total and complete rip off. Do not buy it, it is NOT a good deal, YOU ARE GETTING TAKEN UP THE HIND END!

    I know these things as I used to work for a company that was a PMI underwriter.
    James Kilroy

    Comment


    • #3
      Mortgage insurance, otherwise know as PMI, or private mortgage insurance, is a total and complete rip off. Do not buy it, it is NOT a good deal, YOU ARE GETTING TAKEN UP THE HIND END!

      I know these things as I used to work for a company that was a PMI underwriter.
      James Kilroy

      Comment


      • #4
        The question to ask yourself is this: Do you really need mortgage insurance if you already have life insurance. The simple answer is no! The banks and mortgage companies as well as the finance companies get rich off the extra money they charge you for the insurance. I had disability insurance on a loan I had. It took me and my lawyer combined to finally get them to pay off the note like they were suppose to. It took me another five years to get the bad payments that the insurance carrier delayed each month off of my credit report. They had over 7 times they paid the note 3 months late and ruined my credit for quite a while.

        Comment


        • #5
          jkilroy, what Rick is describing is NOT PMI. PMI will only insure a lender against loss for a loan whose loan to value(LTV) is above 80%. In return for paying this insurance, a borrower recieves conforming (Agency) interest rates. The idea is that you can save more per month with a lower rate and a PMI payment versus a loan and a rate without PMI.

          My 10yrs of mortgage experiance say no one needs PMI. It usually works out to be cheaper to "buy it out" or obtain a loan structured correctly to avoid PMI

          This applies to the US by the way.

          What Rick is describing in what is sometimes called "credit life" insurance.

          Rick, the general thought is that with the payment you would make on your insurance, you could put into an ivestment fund and make considerably more money over the long run by reinvesting your profits. You can do the math for yourself.



          [This message has been edited by cuemaker (edited 07-27-2005).]

          Comment


          • #6
            I don't know about other areas, but here in Texas you can't avoid PMI unless you balance owed is below 80% of the appraised value. This hurts most those least able to pay - first time home buyers.
            Also, when you get your balance paid down 20%, they are not obligated to tell you you can drop it. You have to know to ask. Also, they don't like you to know a higher appraisal can take your out of the PMI-required pool.

            Comment


            • #7
              Rex,

              The rules I described are nation wide. There are alternatives to PMI and in most instance it can be bought out.

              One of the challengs Texas faces is thier legislative restriction on 2nd mortgages. This has cause lenders to stop doing 2nd mortgages in TX, which eliminates an option for avoiding PMI.

              Currently the PMI companies are having a very tough time of it due to everybody taking loans that dont require PMI(ie slightly higher rate) or taking a conforming loan follwed by a 2nd to avoid PMI

              As for the lender telling you that you dont need PMI anymore has also changed. Congress passed a law a few years ago stating that lending must inform the borrower when thier LTV has reached 79% based on the appraised value at time of loan.

              Of course this kinda bunk since home values tend to go up and people reach the 80% LTV long before the loan naturally does.



              [This message has been edited by cuemaker (edited 07-27-2005).]

              Comment


              • #8
                What I actually have is extra life insurance equal to the amount of my mortgage, at a lower rate than what the bank offers, and that has a better payout.

                My mortgage is less than 50% of the value of my house.

                A good chunk of my life insurance is tied up in my divorce settlement as payable to my ex, so I needed to make sure my kids can live in my new house mortgage free if I croak.

                cntryboy -I have good disability insurance, so I declined the disability insurance on the mortgage.

                Sure, I could invest the $30 per month, but if I croak tomorrow, the $360 I put in over the last year isn't going to do my kids a lot of good.

                Comment


                • #9
                  I think the correct term to use here guys is
                  "Decreasing TERM Insurance"
                  The "term" being your mortgage period ie 20 years.
                  This is really cheap insurance available from most all carriers.
                  If you do not get it from the mortgage lender (which they LIKE to do $$$$)you usually have to provide them with the policey from YOUR insurance company, along with yearly payment records.

                  Banks like you to have this, because it allows them to sell your mortgage as an "insured loan" ...that makes it more saleable and they get more $$$$$$$.
                  Green Bay, WI

                  Comment


                  • #10
                    Sure, if you croak tomorrow your investment does no good. But what if you croak 30yrs from now, you could have ALOT more than 80,000

                    I dont advise either way, just advise you understand. You will place the value you need on whats important

                    Comment


                    • #11
                      Maybe I should explain why I am talking so much.

                      I am in the wholesale mortgage business. I help my company fund or purchase loans from brokers and banks. We then bulk the loans to be sold to wall street, private investments or to other wholesale mortgage companies.

                      A serious part of the loans we do are underwritten to Agency guidelines (Fannie and Freddie) whether the loans are sold to Fannie /Freddie or not.

                      The credit life insurance that is attached to some loans has no bearing on the actual loan itself. When it does come into play is in the servicing of the loan. The servicing company must be able to handle that portion.

                      The insurance has no bearing on the note or who holds the note.

                      Comment


                      • #12
                        As many here have stated...mortgage insurance is no deal. Why would you insure the bank? Term life in the amount or more than your mortgage is much more savvy in my opinion.

                        Comment


                        • #13
                          When your dead who cares?
                          The last check you ever write should be to the undertaker and that check should bounce.
                          Non, je ne regrette rien.

                          Comment


                          • #14
                            <font face="Verdana, Arial" size="2">Originally posted by chief:
                            When your dead who cares?
                            The last check you ever write should be to the undertaker and that check should bounce.
                            </font>
                            no dependents to think of?
                            in Toronto Ontario - where are you?

                            Comment

                            Working...
                            X