Term Life Insurance Canada: There are Different Types of Mortgage Insurance
2:46 AM
As you start the process of applying for a home loan, you will probably get into discussions about mortgage insurance.
First of all, there is PMI, Purchase Mortgage Insurance, which the lender requires some buyers to take out (and pay for) on their home loan in the event they are unable to continue to make the payments on their home.
Banks feel they have to protect themselves when a lender has a small down payment. The idea is that the buyer does not have enough equity, or enough of his own money put into the property to make walking away from it a less attractive idea. In a low or no money down mortgage, the borrower has risked no substantial amount that would make him protect his investment as much as possible.
So the lender insists upon an insurance policy that will protect him if the borrower does not continue his mortgage payments. The lender gets the money from the policy if the buyer does not pay the mortgage.
If you are concerned, as a responsible homeowner and family man, that your family will not be able to continue to pay the mortgage and live in their home if anything occurs to stop your flow of income, you may think about taking out mortgage life or disability insurance.
In this type of policy, the main earner buys a policy that allows his family to retain the home in case his salary is no longer available to pay the mortgage.
If you want to protect your family in the event of your death, you would subscribe to mortgage life insurance, which would pay down the outstanding balance on your mortgage in the case of your death. The most popular type of mortgage life insurance is decreasing term insurance, in which the policy amount decreases over time, just as the mortgage is decreasing. There is no need to continue paying the premium on a $200,000 mortgage as the balance gets lower and lower with each monthly payment.
f you want to protect your family in the case you become disabled and unable to earn a salary for a period of time, you would subscribe to mortgage disability insurance, which would pay your monthly payment for the period of your disability.
The difference in these policies makes it important that you have to understand what your lender is discussing. Some lenders can be anxious to sign you up for mortgage life or disability insurance since they can make a commission from it, but if you are in a situation with a low down payment loan, your lender may only be talking about protecting his interests, not yours, when he discusses mortgage insurance with you.
First of all, there is PMI, Purchase Mortgage Insurance, which the lender requires some buyers to take out (and pay for) on their home loan in the event they are unable to continue to make the payments on their home.
Banks feel they have to protect themselves when a lender has a small down payment. The idea is that the buyer does not have enough equity, or enough of his own money put into the property to make walking away from it a less attractive idea. In a low or no money down mortgage, the borrower has risked no substantial amount that would make him protect his investment as much as possible.
So the lender insists upon an insurance policy that will protect him if the borrower does not continue his mortgage payments. The lender gets the money from the policy if the buyer does not pay the mortgage.
If you are concerned, as a responsible homeowner and family man, that your family will not be able to continue to pay the mortgage and live in their home if anything occurs to stop your flow of income, you may think about taking out mortgage life or disability insurance.
In this type of policy, the main earner buys a policy that allows his family to retain the home in case his salary is no longer available to pay the mortgage.
If you want to protect your family in the event of your death, you would subscribe to mortgage life insurance, which would pay down the outstanding balance on your mortgage in the case of your death. The most popular type of mortgage life insurance is decreasing term insurance, in which the policy amount decreases over time, just as the mortgage is decreasing. There is no need to continue paying the premium on a $200,000 mortgage as the balance gets lower and lower with each monthly payment.
f you want to protect your family in the case you become disabled and unable to earn a salary for a period of time, you would subscribe to mortgage disability insurance, which would pay your monthly payment for the period of your disability.
The difference in these policies makes it important that you have to understand what your lender is discussing. Some lenders can be anxious to sign you up for mortgage life or disability insurance since they can make a commission from it, but if you are in a situation with a low down payment loan, your lender may only be talking about protecting his interests, not yours, when he discusses mortgage insurance with you.
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