When you’re applying for a loan, banks love to peruse their way through every financial document that you have. They look for every possible insecurity available, and check your credit worthiness for any flaws.
But even if you can jump through all their hurdles, one by one, over the several months it may take and you get the approval you’re looking for, they’re still going to want even more security.
They’ll want you to have insurance against your mortgage.
Mortgage Life Insurance
Mortgage life insurance is a funny topic though, because there are actually more than one kind of insurance against a mortgage.
Understand, we’re not talking about PMI (private mortgage insurance) where you are mandated to acquire insurance against your loan until you’ve paid off at least 20% of it.
No, we’re talking about mortgage insurance where the bank (or lender) may ask you to have insurance where if you die, they get their money back.
In this case, there are pretty much just two options for you to purchase:
- Mortgage Insurance
- Mortgage Life Insurance
They may seem like the exact same thing, but their not.
Mortgage life insurance is an insurance policy that you own, that you control, and that you designate your own beneficiaries.
Plain old mortgage insurance through your lender or provider designates the lending institution as your beneficiary, and they are the recipients of all proceeds in order to clear themselves of the burden of your loan.
Even more, mortgage life insurance can not only be more beneficial by who receives the money, but it can also be cheaper, more flexible, and maintain a higher payout.
Mortgage insurance slowly decreases to match the remaining principal you have against your house, where mortgage life insurance stays level throughout the policy duration you choose, so as you pay your principal down, your beneficiaries get to keep the remaining balance left over.
One area where mortgage life insurance may fall short is the ability to qualify; you must be healthy enough to get approved for a typical life insurance policy.
The best place to begin looking for a policy is MLIR, who specialize in finding the most affordable mortgage life insurance rates on the market. They’ll even help you if you have medical conditions which might hurt your chances at the best rates.
Plain old mortgage insurance through the bank, however, is much easier to get. While the cost per thousand may be higher because you can’t be turned down, it may the only option for someone who can’t otherwise be insured.
There are also no exam options for those who wish to skip the medical for mortgage life insurance, but be aware of slightly higher costs per thousand, especially if you’re over the age of 50. For someone who is quite young and buying their first home, it’s not much of a difference.
Be sure to always do your research to make sure you’re getting the best form of protection for your home. Remember, you want to have as much control as you can with your mortgage insurance policy.
At the end of the day, who do you want to receive the benefit? The bank, or your own family for friend? Keep that in mind.