Buying Mortgage Insurance is Wrong!
Mortgage insurance is an insurance that the home owner purchases to pay out their mortgage in the event of an untimely death. However, buying mortgage insurance is wrong! Buy life insurance from your insurance broker, and not Mortgage insurance from your lender! It is cheaper, and will give you better coverage! You’re welcome! Have any additional questions? Contact me today! Click here
Important: There are two types of Mortgage Insurance.
There is Mortgage Insurance purchased by the home owner FOR the home owner, and there is mortgage insurance purchased by the home owner for the LENDER (bank). Canadian Mortgage and Housing Corporation (CMHC) insurance is for the lender/bank to be insured if the buyer is unable to make payments on the home. The lender will be insured to cover their losses associated with reclaiming a home from the home owner.
Mortgage Insurance purchased by a home owner for the home owner will pay out the mortgage to their Estate in the event of an untimely death. However, you should purchase Life Insurance for the amount of your mortgage from your Insurance Broker. Don’t have an Insurance Broker? Ask me for some recommendations.
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Mortgage Insurance v. Life Insurance
Let me illustrate this with some numbers to make sense of all this jargon and prove why buying mortgage insurance is wrong! You purchase a home for $200,000 with $10,000 down payment leaving a mortgage of $190,000. If you purchase Mortgage Insurance from your Lender, you will pay pay an example of $100 month. After 2 years of owning your home, you die (sorry for this thought) If you mortgage is $180,000; your estate will receive $180,000.
Now, with the same scenario: you purchase a home for $200,000 with $10,000 down payment with a mortgage of $190,000. If you purchase Life Insurance from your Mortgage Broker for $190,000 coverage and for argument sake you pay the equivalent $100 per month. If you die after 2 years, and your mortgage is $180,000 your estate will receive a payout of $190,000.
You see, with Life Insurance as you pay down your mortgage, if you die (let’s hope not!) your estate will receive the amount for your coverage instead of a decreasing amount as set out with mortgage insurance with a lender. Borrow from your lender, get insurance from your Insurance Broker, go to your dentist for a toothache, buy Real Estate from me! Don’t come to me to fix a cavity, don’t buy insurance from your lender! This is why buying mortgage insurance is wrong! Life insurance also tends to be slightly cheaper per month than mortgage insurance, and tends to have better coverage for cause of death.
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