What Is the Deal with Mortgage Insurance?

Hi-
The response from Jana is exactly right. My husband is a mortgage broker too and he said the same thing. Mortgage insurance protects the lender not the buyer. Throw that junk in the trash, if you needed to have that insurance it would already have been put in your loan.

i have owned my home for about 3 yrs now, i also live in tempe, we checked into that and for the most part i think it's junk, in some cases you can find a good protection plan, but you need to be carefull, they are very exspensive. i hope i was helpful....S.

I agree with Kimberly. You dont need it but it will be nice to have incase something happens to you or you husband. I do have this type of Insurance but we chose to use a company that my husbands family has used for ever with everything. If that is something you are interested in shop around.

My brother, who is a mortgage broker, assures me that mortgage insurance is not necessary. It's just a way for the companies to get your money!

Mortgage insurance is not worth it. It doesn't mean that you get your house or the equity, it just means the bank gets paid off and you owe nothing, but you don't get your house either. (At least that's the fine print in 90% of the ones I've read.) It just upps your rates. In today's market you would be better off selling the home and living off of the equity than bying into mortgage insurance to "break even" and have to move. Or putting the money you would spend on the insurance into a locked savings account.

did you recently buy or refinance your home? We refinanced last year and we got 2-3 offers a day in the mail for about 2 months. We actually had one guy come out. From what we could tell its another way to say life insurance, They call it mortagae insurance (I think) because they will quote you enough to pay off the house incase something happens to you or your husband. You can ghet more or less depending on your needs/wants. It is not mandatory if it was it would have been done when you bought/refinanced. We always say wwe will but it seems the insurance premium is never a priority here, there is always something else to buy first. Shop around!! My moms friend (ins agent) gave us a quote after meeting with that guy and it was much less. Get quotes for regular life insurance too its basically the same thing.

Hi S.,
I work as mortgage broker.
The payment protection plans are disability and term insurance, we call it choke and croak insurance. It is a personal decision but if one wants the insurance, your regular agent will have much better rates. Most offers in the mail are overpriced.
Mortgage insurance is something different. If one buyes a house and finances more than 80% of the sale price will need Mortgage insurance premium (MIP)(in addition to the regular payment). It is to protect the lender in foreclosure situations.
It is factored that approximately 20% of the property value is used up in the foreclosure process. The MIP pays for that cost and it has NO VALUE to the borrower.

I hope that will help you.
Let me know if you need anything else
J.

Hey there,
This amendment is for all the mommas out there researching that find this link from 2006. It is outdated. The comments were true and correct for the time but after the fall of AIG, insurance went through a significant change. Mortgage Protection insurance is different now.
For one thing - It isn't paid to the lender anymore - it's paid directly to your beneficiary so make sure its the person you want to get the home. If they choose to take the cash and sell the home to better provide for your family, they have that right.

Second - Mortgage Protection is still term which means it last as long as your note is supposed to but the benefit and premium stays level now, which means you aren't paying more than the old type of insurance and they can't raise your rates for your term but the benefit doesn't go down with your principle owed. (You take out a 150k policy to cover your loan now and in 20 years if something happens your loved ones still get 150k)

Third - While MP is still really life insurance there is one big difference - you can get return of premiums now on a term policy as well as riders to cover in case you get critically ill, have to go into a nursing home, or are told you have a terminal illness.
SO if you die, your family gets the house and maybe a bit more - If you get sick or disabled most riders cover your mortgage and monthly expenses up to $5000 month depending on your loan or a flat amount like $25k or $50k if you are given a terminal notice. (Research this - every company is a bit different and some offer these options free)

Stephani ~

I love popular financial advisor and best-selling author, Dave Ramsey. He says never buy insurance from a lender of any kind. The reason? They'll rip you off for sure.

My husband and I have received so many of those offers in the mail since we purchased our home, too. They go straight into file 13. ;)

~ R.

It's actualy not called mortgage insurance what you are talking about that is something different, but working in the industry I will also tell you that you really don't need it, especially if you have back-ups in case something happens(like life insurance/medical insurance) and what they both offer you. We have both life and medical and with my husbands medical it pays for our expenses if he gets hurt on or off the job. If you don't have any back-ups you might want to consider it only because you can never be to safe and you can never predict if something will happen. It's nice to know that things can be taken care of in case of an incident. If you don'y have anything realy research it or in that case research your other options as well.