The Upside and Downside of Alexandria Mortgage Life Insurance
Posted by David Zadareky on Saturday, August 27th, 2011 at 9:15pm.
Thanks to mortgage life insurance, losing a loved one, while heartbreaking, does not have include the additional financial disaster many mourners face.
With the scares of our earthquake and hurricane, many of us here in Alexandria and the Greater DC Area have had the specter of death, however fleeting, pass through our minds. This can be positive, if such thoughts lead to planning for our families.
It is a wonderful thing that the quake did such little injury. If there had been a serious death toll, how many dependents of homeowners would not only have lost a parent, but several months later lose their house too?
Most Alexandria home buyers want to make sure their loved ones get to keep their home. One option is mortgage life insurance. But is it the best way to keep your family from being homeless?
Buyers may remember having to pay mortgage insurance when they bought their home, which is insurance that protects the lender from losing money on your house. Mortgage life insurance, however, protects your loved ones by paying off your mortgage if you die before the house is paid off.
Some great financial articles at SFGate on the San Francisco Chronicle web site, on the House Logic site and at Cash Money Life shed light on the pros and cons of mortgage life insurance. Two big draws to mortgage life insurance are:
- You won't be turned down for health conditions or age, which often happens to those trying to buy regular life insurance.
- If you do have a health condition, or are elderly enough that the lenders are wondering about how much of a risk you might be, buying the insurance may increase your chances of the loan being approved.
Amber Keefer, Demand Media for SFGate writes, “If you are putting a down payment of less than 20 percent on a home, the lender will probably require that you take out a mortgage life insurance policy or else your application for a loan may be denied.”
But Ryan Guina, of Cash Money Life, points out regular life insurance may be a better buy for most people. “Overall, mortgage life insurance doesn’t seem like a great idea for most people. You pay the same amount of money each month for a decreasing benefit and you have no control where the payout of the policy goes or how it is used.”
G.M. Filisko, of House Logic, says, “Mortgage life insurance isn’t the only way to keep a roof over your family’s head.” Two other options are:
- Standard term life insurance. It’s economical and renewable and you’re protecting your family no matter where you move.
- Return of premium life insurance. Standard term life with a twist: Although a little more expensive, if you live beyond your term—usually 30 years—the company refunds all your premiums.
So which is it? How do we know if mortgage life insurance is right for us?
Guina says, “That will depend upon the amount of your loan and the value of your house, your family’s assets and your general health. In addition to these factors you must consider the term of your loan and the possibility that if you rewrite your mortgage or the bank sells you loan, you’ll have to rewrite the mortgage insurance policy as well.”
And of course always read the fine print of several policies and weigh them with your family's financial needs before making a choice. Wise words for any of us here in Northern Virginia.
If you’re in the market to buy or sell a home in Northern Virginia, you owe it to yourself to work with an exceptional real estate team committed to Going Beyond Your Expectations. That team is RE/MAX Evolution & David Zadareky.
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Artiecls like these put the consumer in the driver seat-very important.
Posted on Sunday, November 20th, 2011 at 10:25am.