fred@mot.UUCP (Fred Christiansen) (09/11/85)
[]
About once per month I get a friendly letter from my mortgage company
encouraging me to buy mortgage insurance. Since it looked like junk
mail, I tended to throw them away. However, upon recent examination,
the idea looks like it has some merit.
Then again, thought I, am I not already paying a form of mortgage
insurance .. that 1/2 % interest that FHA slaps on for the life of the
mortgage? Well, to be frank, I have no idea what that FHA 1/2 point
does, nor who benefits.
Anyone know? If I get mortgage insurance, can I tell FHA to
forget that 1/2 %?
--
<< Generic disclaimer >>
Fred Christiansen ("Canajun, eh?") @ Motorola Microsystems, Tempe, AZ
UUCP: {seismo!terak, trwrb!flkvax, utzoo!mnetor, ihnp4!btlunix}!mot!fred
ARPA: oakhill!mot!fred@ut-sally.ARPA AT&T: 602-438-3472csg@pyramid.UUCP (Carl S. Gutekunst) (09/13/85)
Please excuse me if you see this more than once; uux barfed the first time. In article <252@mot.UUCP> fred@mot.UUCP (Fred Christiansen) writes: >About once per month I get a friendly letter from my mortgage company >encouraging me to buy mortgage insurance.... Mortgage insurance is basically decreasing term life insurance, with the benefits being paid directly to the mortgage holder. The advantage over a normal decreasing term policy is that usually (but not always) the insurance payout exactly matches the outstanding balance of the mortgage. Should you die, your survivors will own the house free and clear, with no additional hassles. Also, the premiums are usually simply added to your monthly mortgage payments, making payment very convenient. There are a number of serious disadvantages, however. The money will go ONLY to pay off the mortgage; your survivors will not be able to divert the funds to more pressing expenses. For families where both spouses are wage earners, it is a must that both be covered; mortgage insurance policies generally do not allow this. You aren't able to chose the carrier; the mortgage holder may well have chosen some fly-by-night outfit that won't be around in ten or fifteen yeras. Some policies also have nasty gotchas -- like following a different (lower) curve than the loan balance, so that your survivers get stuck with the difference, payable on the spot. Mortgage insurance is usually much more expensive than regular decreasing term (the mortgage holder gets a cut). If you already have a life insurance policy, you can usually increase your coverage at nominal cost; this is usually even more convenient than the mortgage insurance. Summary: If you want mortgage insurance, you are much better off taking out a normal decreasing term policy, or increasing the coverage of your existing policy. It will save you money on premiums, and it will give your survivors valuable freedom of choice. >... If I get mortgage insurance, can I tell FHA to forget that 1/2 %? I'm not positive, but I believe that is insurance against your defaulting on the loan, not against your dying. Mortgage insurage would not affect it. -- -m------- Carl S. Gutekunst, Software R&D, Pyramid Technology Corp. ---mmm----- P.O. Box 7925 {allegra,decwrl,dual,nsc,sun}\ -----mmmmm--- Mt. View, CA {ihnp4,uiucuxa,uwvax}!pyrchi >!pyramid!csg -------mmmmmmm- 415/965-7200 topaz!pyrnj/
stevev@tekchips.UUCP (Steve Vegdahl) (09/18/85)
> About once per month I get a friendly letter from my mortgage company > encouraging me to buy mortgage insurance. Since it looked like junk > mail, I tended to throw them away. However, upon recent examination, > the idea looks like it has some merit. > Then again, thought I, am I not already paying a form of mortgage > insurance .. that 1/2 % interest that FHA slaps on for the life of the > mortgage? Well, to be frank, I have no idea what that FHA 1/2 point > does, nor who benefits. > Anyone know? If I get mortgage insurance, can I tell FHA to > forget that 1/2 %? There is some confusion here about the difference between MORTGAGE INSURANCE and MORTGAGE LIFE INSURANCE. Mortgage insurance (the 1/2 %) is often required by lenders when the loan-to-equity ratio is high, typically greater than 80%. It insures against borrower walking away from the loan and leaving the lender stuck with a house to forclose on and then sell. Forclosure costs, commisions, closing costs and such can leave the lender with a loss. Mortgage life insurance is almost certainly what you are being offered in these mailings. Some of its disadvantages have already been noted by another responder. Yes indeed, it is generally an extremely poor buy. Consider that a healthy male in his early 30's can get $100K of term insurance for around $150 per year. Compare that rate to the insurance you are being offered. I would not be surprised if it's more than double. Incidentally the confusion between these two terms seems to be encouraged by the manner in which mortgage life insurance is advertised.
lat@druil.UUCP (TepperL) (09/22/85)
> Mortgage insurance is usually much more expensive than regular decreasing > term (the mortgage holder gets a cut). If you already have a life insurance > policy, you can usually increase your coverage at nominal cost; this is > usually even more convenient than the mortgage insurance. We recently received an offer for mortgage insurance on our place. The cost per dollar of insurance was almost 3 TIMES that of a regular term insurance policy suggested by our insurance agent. No way, Jose. And, as you mentioned, proceeds from the mortgage policy must be used to pay the mortgage. -- Larry Tepper {ihnp4 | allegra}!druil!lat +1-303-538-1759
lee@butler.UUCP (Kyu Lee) (09/28/85)
> [] > About once per month I get a friendly letter from my mortgage company > encouraging me to buy mortgage insurance. Since it looked like junk > mail, I tended to throw them away. However, upon recent examination, > the idea looks like it has some merit. > Then again, thought I, am I not already paying a form of mortgage > insurance .. that 1/2 % interest that FHA slaps on for the life of the > mortgage? Well, to be frank, I have no idea what that FHA 1/2 point > does, nor who benefits. > Anyone know? If I get mortgage insurance, can I tell FHA to > forget that 1/2 %? > -- > << Generic disclaimer >> > Fred Christiansen ("Canajun, eh?") @ Motorola Microsystems, Tempe, AZ > UUCP: {seismo!terak, trwrb!flkvax, utzoo!mnetor, ihnp4!btlunix}!mot!fred > ARPA: oakhill!mot!fred@ut-sally.ARPA AT&T: 602-438-3472 In-Reply-To: your article <252@mot.UUCP> FHA insurance is to insure the lender, not you. As for the mortgage insurance, It is considerably cheaper to buy a term life insurance for that amount rather than the mail order stuff. If you belong to ACM or IEEE, they have probably the lowest rates on life insurance. Whether their payment to the claims is any good, I do not know; I have not died yet to find it out. Most professional or social organizations or your company have some time of group rate. Check it out & good luck.
dumelle@ihu1m.UUCP (j. dumelle) (10/11/85)
There was a discussion some time back where Dave Kirby wrote an article regarding FHA and VA Mortgage Insurance (1/2%) and that homeowners may have been paying this premium unnecessarily. Well needless to say it got me in the letter writing mood. I am well beyond the 10% down payment on my home, as a matter of fact I'm around 40% paid. Below is the response I received from my mortgage company and my question is what's my next move? Thank you for your recent inquiry regarding the elimination of your FHA insurance. Unfortunately, we must deny your request to eliminate your FHA insurance from your monthly payment. It is the policy of GMAC Mortgage Corporation to retain the FHA insurance requirement throughout the life of the loan. Should you have any further questions in regards to this matter, please do not hesitate to contact me. Sincerely