Mortgage Protection Insurance?

[ablang]

Does anyone have Mortgage Protection Insurance? Not to be confused with PMI, also known as Perpetual Mortgage Insurance. It's where you pay like $25 a month for coverage of say $200k or $250k that pays off your house for your beneficiary if you should die. Or, if you live, you will get your money back (unlike actual insurance policies) after the 30-year term.

Does anyone have this, or does this sound interesting to you? I'm not selling anything. Just asking for opinions.

[Theophylact]

Bad idea.

[Richard Cranium]

Been around the game of borrowing money for a long time.

Get Life Insurance instead.

also, never get a 30-yr loan, a 15 year is only about 16% more payment per month, this varies, get them to use an Amortization Table to determine costs.

And, a 30 year note carries an increased percentage rate, some charge more "points" or a higher "origination fee"

Get an "Escrow" account, this is mandated if you pay less than 20% downpayment, it's easier to pay taxes & insurance monthly than come up with huge sums yearly.

gluck

[Theophylact]

By the way: most of the references on Google seem to be British; this must be more common there than here. But here's a relevant article from the Tallahassee Democrat.

[Marunad]

I agree with Cranium. MPI, for the most part, is similar to credit life insurance sold with auto loans. The exceptions to coverage that the insurance company can and will use to avoid making payment tend to be somewhat broad, the utility of this product as an investment tool is for the most part barely above nil. There are various Universal and Term life insurance policies available that may fit the bill for you on better terms AND with at least some more practical investment use.

Escrow accounts are also good to avoid that regular property tax bit in the bum. If you use that option and select a private Escrow Company though, check and verify that the company has an appropriate Fidelity Bond that is in place, paid up and covers at least $100,000 per occurrance.

Also, as a GENERAL rule of thumb, if your average Credit Score is at or above 660 or so and you're using a mortgage broker, if you're paying more than 2 points total in fees you may be getting taken to the cleaners unnecessarily. It can also be helpful, with mortgage brokers, to find out whether the initial loan funding is coming off a lender's internal warehouse line and then being immediately assigned and sold on the secondary market. If it's coming off a warehouse line that also frequently means you may have more room to negotiate down your points/fees and/or your ultimate interest rate.

Just a couple o' thoughts

[ablang]

Theophylact:

Your provided link didn't say much bad about MPI itself, just that benefits take 9 months to kick in. The one I was being interviewed for covered suicides as well, so long as it didn't happen within the 1st 2 years.

Your 2nd link was probably more helpful.

Thanks to all, and please feel free to add any more thoughts, if anyone has any.

[fatal xception]

Also, 30's aren't always the best solution. If you are going to be in the house for 5 to 7 years, get an 5/1 or 7/1 arm (adjustable rate mortgage). For 5 or 7 years the rate stays at a very low rate. Keep in mind you will most likely need to do something close to the 5 or 7 year anniversary of you loan. For the month after your anniversary, your percentage rate can increase (or decrease, yeah right) up to 5% points the 1st change, up to 2% points every year after with a maximum of 5 to 7 point cap.

Escrow accounts aren't bad (your taxes and insurance are always paid), but remember you don;t get interest on monies in the escrow account and most institutions insist in a 2-month cushion. So if your monthly escrow payment is $250, which is low in many cases), the escrow account will collect the money to pay your estimated insurance and taxes in addition to collecting and maintaining that cushion.

[MegalosSkylaki]

by making the 20% downpayment if you can at all possibly can.

Many of these policies continue even after you have 80% + equity in the property.

And I would agree with da Docness about Life Insurance.

But better make it TERM , not "Universal".

Avoid the Adjustable mortgages--especially now. If you can't afford the fixed rate now, what are you going to do if the adjustable shooots up? And it is guarenteed to do so after the two "teaser" period. Let alone general interest hikes.

If you can't afford the Fixed, try getting less house. Ditto the PMI.

DOOOOOOOG

P.S. To those who have PMI, try to get the mortgage holder to cancel it if you have built up sufficient equity. They don't volunteer to do it.

[MegalosSkylaki]

P.S. You can ususally prepay a 30 year (check on penalties) so you can lower the payment now , but maybe reduce the payment period if your finances improve.

But the problem with a 30 year is that the first few years are almost ALL interest payments. The average lenght of home ownership in US is about 6 1/2 years, I think.

DOOGSTER

[Ed_S]

PMI is a bad deal, the reasons have already been listed. If it's still available, look into a "decreasing term" life ins policy, set to the same term as your mortgage.
Cheaper than std term ins, but the payoff figure goes DOWN as time passes, much like the amount owed on the mortgage does.
Advantages are low rates, you can cancel it at any time, and most important - the payment goes to your beneficiary, NOT directly to the mortgage lender. In most cases, the beneficiary is a spouse who will then pay off the mortgage anyway but this way it's his or her choice!

With PMI, on the other hand, the mortgage holder IS the beneficiary, and there is NO choice...

BTW - the premium for my policy was $26 quarterly for $80K initial coverage...
Gone now, as is the mortgage!

****

Regarding loan term - definately look into a 15, but even with a 30, you can always make extra payments. Even an extra $20 monthly DOES make a long-term difference. Run the numbers through an amortization program, you'll be surprised what you save!