Fifteen years ago and newly engaged, my husband and I bought our first home. Like many first generation Italian-Canadians, we were both still living at home with our parents (ahhhhh, the good old days of home cooked meals and folded clean laundry… but alas, I digress). At that time, I had just started the first phase of obtaining my real estate licence so we were both typical first time home buyers, we knew next to nothing and were overwhelmed with making a lot of financial decisions in a rather short time period. One of those decisions was mortgage insurance through our bank. It sounded like a great idea. For $40 a month wrapped into our biweekly payments, our mortgage would be paid off in the event of the death of my husband (and only him as he was the one on title at that time). After we sealed the deal and closed on the house, we had a friend in insurance inform us that there was a better option out there. Here are just a few reasons why you should opt out of mortgage insurance:
- PREMIUMS: While $40/month didn’t sound like a lot of money to us at the time, we later found out it was a whopping amount to pay for a $180,000 mortgage. Mortgage insurance is more expensive than obtaining term life insurance. To give you an idea, my husband and I both obtained life insurance shortly after our home purchase for more than our mortgage amount and paid less than $40/month.
- DECLINING BENEFIT: The bank’s life insurance amount decreases as you pay down your mortgage. What that means is you keep paying the same premium for a value that goes down. This was one of the main reasons why we cancelled our mortgage insurance and obtained life. Our premium was lower and the value never changed.
- BENEFICIARY: With mortgage insurance the bank is the beneficiary. With life insurance, you name the beneficiary and that beneficiary can spend the money how they see fit. Perhaps they do not want to pay off the remainder of the mortgage and wish to invest it or use it for the post-education of their children. In either event, what is important is that the beneficiary has the choice.
Remember, I am a licenced REALTOR®. I am not an expert on mortgage insurance or term life insurance or any type of insurance for that matter. I do not want anyone to run out and blindly cancel their mortgage insurance after reading this blog. The best advice I can give is to sit down with a trusted insurance advisor to do a proper needs/analysis. They will look at your current insurance policies and determine what best suits your unique needs. I have learned that it is important to surround yourself with the right professionals to give me the best advice. Reach out to Dave Szalkai at Bedard Co. Life Inc (519) 690-2682 or email firstname.lastname@example.org. Check out this article below to learn more about Dave:
Questions/Comments? Call or text me at 519-859-7792.