U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
Old 12-11-2009, 03:06 PM
 
166 posts, read 689,782 times
Reputation: 97

Advertisements

Not sure if this is the right forum to ask the question OR if I am calling it the right thing - we just bought a house and are getting a lot of calls/mail about buying mortgage protection - basically, if one of us dies, then the mortgage gets paid off. My question - is it worth it? If we owe 340K on the house, I am wondering what the payment would be like? Does anyone have it? Any feedback/opinions would be much appreciated.

Thanks,

Beth
Reply With Quote Quick reply to this message

 
Old 12-11-2009, 03:50 PM
 
28,384 posts, read 67,998,510 times
Reputation: 18190
The primary way that a "mortgage protection" policy differs from a standard term life policy is that since your mortgage balance is constantly decreasing (and a varying pace, which I will clarify later) most such polices are set up to decline in coverage but remain fixed in cost. That can a very bad deal that is easy to "forget about".

The $340K you owe right now will decrease very slowly at first, as your are mostly paying interest. Over time the portion of principle will increase. Some time in 30 years (if you stay put) you will make you last payment. If you were to pass away right before that last payment the insurance would "cover it" but odds are your survivors would also have been able to cover one payment with no problem. OTOH if you passed away tomorrow and the insurance paid off the loan your heirs would have the house free and clear and you would have paid only a tiny bit in premiums.

It is therefore VERY hard to calculate the cost of such coverage, and can also be hard to compare to fixed payout term life (which is pretty easy to shop for online ...).

Most people would feel better having a known payout that would replace the income of the deceased to a known degree. If your heirs decide to use the pay out to pay off the house or use it for any other purpose you would have provided for them regardless of what your "owe the lender".

I would encourage you to think about the value you would get from this policy if you sell the house in 7 years, 15 years, et cetera. Odds are you could lock in a term policy that addresses the specific needs you might have that is more cost effective than tacking payments in tied to your mortgage...
Reply With Quote Quick reply to this message
 
Old 12-11-2009, 04:25 PM
 
166 posts, read 689,782 times
Reputation: 97
Chet,

I know you have heard this before, but, this is a great post, with great pointers. You gave me many thoughts to mull over...
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top