Do a little homework before you buy mortgage insurance
If you have recently taken out a mortgage, you know that after you are approved and just before you sign the papers, you will be offered mortgage insurance from your mortgage lender. "That will cost you $8 per $1000 of coverage for mortgage insurance." It may be convenient at the time but before you say yes to mortgage insurance, I would suggest that you weigh some of your options and some of the important issues.
Is it a fair price?
The reality is you will not know if the price is fair until you shop around. Once you start shopping around, you will realize how the price will vary from one institution to another. Lets look at the situation of Rebecca and Garry, who were recently approved for a $200,000 mortgage. Based on their ages 35 and 33, the bank offered them life insurance for $38.00 per month. Is that a fair price?
If Garry and Rebecca shopped around, they would find that they could buy mortgage insurance for $31.00 per month or 18% less than what the banks offered them. In addition to a savings on cost, they would also be getting some added benefits:
The price would be guaranteed over the next 10 years. The banks insurance rates can be adjusted every year at their discretion. The policy would pay on both lives so that if both Garry and Rebecca die, it would pay the $200,000 twice. On the bank side, it would only pay once. The private policy at $31.00 per month would pay the $200,000 regardless of what the mortgage balance is at. On the other hand, the banks insurance would only pay out the balance of the debt. They issue a declining amount of coverage |
