Important Information for All Oshawa Home Buyers
*Making the best choice for your mortgage protection*
You're sitting in an office across from a mortgage loans officer. It could be your local bank, a credit union, or another lender. You've signed all the papers for your mortgage.
Now comes the question that you haven't thought about “Would you like to have mortgage life insurance?"
"What's that?" you ask.
"If you die, the mortgage life insurance will pay off your mortgage so your spouse or family doesn't have to worry about it."
You, like many others, are tempted to respond, "Where do I sign?"
But wait a minute! Think about what you're getting before you put your name on that mortgage life insurance application.
Putting yourself in charge
The primary difference between a life insurance policy and mortgage life insurance from a mortgage lender is the “control”.
With a life insurance policy that you own, you decide who the beneficiary will be.
With mortgage life insurance, the financial institution is the beneficiary and gets all of the death benefit.
Life Insurance- Your beneficiary chooses how to spend the tax-free death benefit from your life insurance policy. This could be used to pay down the existing mortgage, or pay other debts, or lines of credits. It may also be used to invest elsewhere rather than paying off your current mortgage if you choose to. Control and flexibility is what it boils down to.
These options don't exist when you have mortgage insurance where the lender controls all the proceeds.
Many Oshawa homeowners don't realize that mortgage life insurance is actually called a “decreasing term insurance”. The amount that you owe on your mortgage goes down as you make payments on the principal. At the same time, the death benefit of the mortgage life insurance goes down by the same amount. Since your mortgage life insurance premiums stay the same, you're actually getting less coverage for your money every time you make a mortgage payment.
Also, many Oshawa homeowners will change mortgage lenders at least once during the time they're paying off their home, especially if they can get a lower interest rate somewhere else. If you take your mortgage to another company, in most cases, you will lose your mortgage insurance and have to apply again at the new company. When you sign for a mortgage life insurance policy with your lender, bear in mind that you lose control, value, and flexibility of those funds.
An alternative to consider
Using an individual life insurance policy to protect your Oshawa home mortgage offers numerous advantages. It's important to note the difference between an individual and group insurance policy. With mortgage life insurance, you're a member of a group. This is a collection of people who have mortgage debt with the same lender. The lender or insurer may cancel a group policy at any time, and that means you could lose your coverage.
With an individual life insurance policy, you're in total control. You're the only person who can cancel or alter your policy.
Another benefit of life insurance is the value of the death benefit doesn't decrease as you make mortgage payments. For example, a life insurance policy with a face value of $100,000 will still be worth that much down the road as long as you make the required premium payments.
Control leads to flexibility
If you have a life insurance policy to protect your mortgage, and a better mortgage rate exists at another company, you can transfer your mortgage to that company knowing your insurance remains in force. You don't need to re-apply. You're protected from the danger of not qualifying for a new life insurance policy if your health changes.
If price is a concern, be sure to consider all your options and what value you get for your money. Depending on the policyholder's age and the amount of the insurance policy, individual life insurance may be cheaper than the lender's mortgage life insurance. It's worth talking with an advisor to see how the policies compare.
Articles supporting mortgage insurance rather than a policy to protect your mortgage have indicated the lender probably won't ask you to fill out a medical questionnaire. If you're applying for a large mortgage, however, banks in particular will likely demand that you fill out a more detailed health application, and perhaps ask for a blood or urine sample. Usually the more detailed medical information required by insurance companies actually protects you.
In short, these articles often fail to explain the benefits of value, control, flexibility, and security when an individual life insurance policy covers mortgage debt. The final choice is up to you. Weighing your options will help you get the most out of your money.
Are you thinking about buying a home?
When you take that first big step, the bank or financial institution holding your mortgage will ask you if you would “like to buy their mortgage insurance”.
As mentioned earlier, not only does the amount that you owe on your mortgage goes down, but the amount covered by mortgage insurance goes down as well. Unfortunately, your premiums will always stay the same!
Instead of getting mortgage insurance, a better alternative is to own a life insurance policy in order to cover your mortgage. This way, the value of your insurance policy never changes as your mortgage debt decreases.
I can show you how to put yourself in control, instead of the bank.
Click on This Link to learn more about insuring your mortgage with life insurance.
Please feel free to contact me at your convenience if you have any questions, or would like more information about the services I offer.
Submitted By:
Brandy Terry - Financial Advisor
Sun Life Financial
950 Lansdowne Street W
Peterborough, Ont.
(705)742-0474 Ext. 2248
Email: Brandy.Terry@sunlife.com
|