Posted on: 01-02-05 16:12:41
Hi,
Does anyone has information about the various sources to buy Mortgage Insurance? What are the current rates and who has the best rates?
Thanks,
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Sunil Sharma, P.Eng.
Quote:
Orginally posted by sunilosharma
Hi,
Does anyone has information about the various sources to buy Mortgage Insurance? What are the current rates and who has the best rates?
Thanks,
Generally mortgage insurance is offered to you by the bank you are taking the mortgage from or the mortgage broker firm/agent arrange the same for you. But in this case the beneficiary is the bank and if god forbid something happens to you, the bank gets the money and your spouse/family get the house.
Even though this mortgage insurance looks a little cheaper (?) and generally offered without much medical questions, it may turn out to be costlier in the long run and I would advise my clients to go to an insurance broker and get the best term insurance for term 10 or term 20 and make your spouse and or family the beneficiary of the same.
Here are some of the downsides of buying mortgage insurance from the bank or through the mortgage broker :
The bank is the beneficiary. If something happens to you all the money goes to the bank and your family keeps the house.
Your mortgage insurance payments remain fixed even though the mortgage balance keep coming down. Suppose you buy a mortgage insurance for $250,000 and over the years the mortgage balance comes down to say $175,000 your premium does not come down.
These mortgage insurance are generally not transferable, which means that after your term is over and you switch the mortgage to some other bank, you have to again qualify for the mortgage insurance with the new bank and you might have to pay more as during this time your age has gone upand there could be some medical problems etc.
While on the other hand if you buy term insurance and if something happens to you, your spouse and/or kids get the full proceeds and then it is their choice to pay the mortgage completely and keep the remaining amount with you. You also do not have to worry if you change mortgage to other institution after the term and you do not have to requalify.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Pramod Bhai,
Is mortagage insurance mandatory? If not, why do people buy it thinking that it is mandatory (like some people remark - how can you not have a mortgage insurance if you have mortgage?)
Chandresh
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Chandresh
Advice is free – lessons I charge for!!
Quote:
Orginally posted by chandresh
Pramod Bhai,
Is mortagage insurance mandatory? If not, why do people buy it thinking that it is mandatory (like some people remark - how can you not have a mortgage insurance if you have mortgage?)
Chandresh
Chandresh Bhai,
Like life insurance, critical and health insurances, accident and disability insurance the mortgage insurance is also NOT MANDATORY but is highly recommended. Please note that this mortgage insurance (which is on the life of the borrower/s for the term of the mortgage with that particular bank) is not to be confused by the 'Mortgage Default Insurance' which CMHC/GE provide to the bank on behalf of the borrower in payment of a one time fee depending on his down payment towards the cost of the house.
People take all these insurances to protect themselves and their loved ones from any untoward happenings/expenses in future. Bank's have their vested interest in selling these as they become the beneficiary of the proceeds in case something happens to the borrower. They get to keep more than they loaned and the borrower's family (beneficiaries) get to keep the house. And if nothing happens to the borrower, then bank has made money in the monthly premiums.
People are brain washed by the banks and the mortgage / insurance brokers to take this insurance (as they make money) so as to protect their house, which is also true and ONE SHOULD HAVE SOME SORT OF PROTECTION. However, as I have mentioned in my previous post, I would always suggest people to take term/ life insurance to protect their house for their loved ones in case of any mis-happening.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
I appreciate the prompt reply by Pramod. He is right, the bank always tries to sell you the Mortgage Insurance with the mortgage and it is not mandatory, as pramod has stated.
It will be interesting to know the term insurance for a hypothetical case of mortgage amount of $250,000.00 with normal health of a person around 35-40 yrs. of age.
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Sunil Sharma, P.Eng.
Quote:
Orginally posted by sunilosharma
I appreciate the prompt reply by Pramod. He is right, the bank always tries to sell you the Mortgage Insurance with the mortgage and it is not mandatory, as pramod has stated.
It will be interesting to know the term insurance for a hypothetical case of mortgage amount of $250,000.00 with normal health of a person around 35-40 yrs. of age.
Anywhere between 48 cents to 63 cents per $1000 annually for a 10 year term for a healthy, non smoker male and 86 cents to $1.20 for a 20 year term for a healty, non smoker male with preferred rates.
Policy fee (app. $65 per year) and surcharge on monthly premiums are extra.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
