Mortgage Insurance

[LeighF]

Hi there
I know that I have seen some threads on this subject before, but can`t find them.

Hello fellow investors:

When getting mortgages, do you sign up for the mortgage insurance that the banks offer (sort of pricey) or do you go with different options?

Thanks very much

 

[GaryMcGowan]

To Insure or not to Insure?

That’s the question many people have. The first thing you should ask yourself is why do you want insurance? Does it make sense to take out mortgage insurance from a bank or any other type of insurance on the mortgage?

Consider this: a 200k mortgage will approximately cost $60-70 a month to insure. In 5 years from now your mortgage will have been paid down to about 175k and you are still paying $60-70 a month. In 10 years from now your mortgage will have been paid down to about 147k and you are still paying $60-70 a month. The big thing to keep in mind is the longer you keep the mortgage insurance the less it is worth. E.g.: day 1 insurance value is 200k. After 5 years insurance value is 175k. After 10 years insurance value is 147k. And you are still paying the same rate.

Another option could be: take out insurance on your business partner or spouse. For the same cost you can get twice as much insurance and keep the same value to the end of the policy. Also if this is an investment property with monthly income, why insure something that carries itself whether you are there are not? I understand all properties take up your time in some way or form but this is situation where passive income is working for you and your family at its best.

Do not however negate to have sufficient insurance on the property for damage, loss of income and other related insured features.

Just my two cents.

gary

 

[kboughen]

QUOTE (LeighF @ Oct 31 2008, 09:48 AM) When getting mortgages, do you sign up for the mortgage insurance that the banks offer (sort of pricey) or do you go with different options?

I prefer to keep my life insurance plan completely separate from my mortgages (I do not take individual mortgage life insurance). When considering how much insurance I should carry I do consider my entire financial picture and the needs of my survivors, mortgages are just one part of the picture.

If I take on more debt (refinance or acquire more mortgages) I may decide that I should increase my insurance by a certain amount, but not always. I recomend you add an Insurance Broker to your team and review your over all insurance needs.