When I was working as a Residential Mortgage Loan Officer, it was simple to calculate a Mortgage Life Insurance rate. It wasn’t difficult at all.  It was solely based on the process of the applicant breathing.  If they breathed, had a heartbeat, they qualify.  So for me, it didn’t seem like a hard sell since most of my applicants did breathe.  The lender that I worked for explained the importance of having me sell the program.  They said, “Sell the program to all your customers because, in case the mortgage holder dies or becomes disabled, they are covered”.  I didn’t think too much into the program.  I thought, what a benefit for the customer.  What a benefit of protecting the customer in the event of a major catastrophe in their life.  It wasn’t difficult selling feature.  But then I thought about the importance of having the lender sell this type of policy.  Figure, of all mortgage holders that have a 30yr mortgage, how many actually outlive their 30yr mortgage?  How many of them turn around and sell the home after five years?  The numbers are astonishing.  Most people don’t realize that four out of every five homeowners sells their home after five years.  That’s crazy!  What a waste of money to four of the five families if they decide to sell this home, close on the mortgage, lose one to five years payments of mortgage life insurance, to start all over again and purchase another home.  So, that leaves one homeowner that possibly stays in their home for more than five years.  I could only imagine how many of the 20% stay in the home for 10 years.  It’s too difficult for me to imagine.  But, I could bet you that the mortgage lender knows exactly how many of them do.  Is there some type of benefit to mortgage companies to offer mortgage life insurance to mortgage holders during the mortgage application phase?  Of course!  Lenders would consider this type of mortgage life insurance cheap and affordable since it protects the mortgage companies’ investment.  Think about this, their investment to you is covered if you die or become totally disabled.  Before considering this, I would definitely shop around.  Find a life insurance company that allows you to cancel (or start) your policy during the life of the loan.  See if there’s a company out there who could give you the best affordable rate and maybe even additional coverage. I would say that mortgage life insurance to most mortgage customers is an afterthought to the principal and interest.  But every customer has different goals.  For me, I am single and no children.  But what happens if you’re married and have children?  What do they do if your hot able to make the payment?  Think what happens to your family after you leave this world.  Now, mortgage companies calculate life insurance in many different ways.  Most life insurance companies base the policy on simple things like, your height, weight, age, if you smoke, term of the loan, or the loan balance.  Some base the payment on nothing at all but you being alive.  Its simple, find the best Mortgage Life Insurance rate for you, if you want to protect your family due to your death or disability.

Getting the best Mortgage Life Insurance rates is important.  As soon as you close on your home, you will soon get letters pouring out of your mailbox from insurance companies attempting to sell you Life Insurance.  Do you know what they are trying to sell you?  Be careful!  Some of these companies are scams, and can be very costly.

But is Mortgage Life Insurance Important?  Well, it all depends on the consumer.  In a short, brief synopsis, Mortgage Life Insurance is a protection Life Insurance Policy that promises to pay off the remaining balance of your mortgage in the event of death or disability.  It frees your family from having to worry about making a mortgage payment every month.  This is an optional program that is totally up to the consumer.  Every Insurer has a different type of coverage or policy and, every one of them is different.  Cheap and affordable policies are difficult to find.  Here are the not so benefits when it comes to having Mortgage Life Insurance:

1)    As you pay down the term of your mortgage over the years, whether you have a 15, 20, or 30 Year Loan, the value of your mortgage life insurance policy gets lower since the balance of your mortgage goes down.  If the balance of your mortgage let’s say, goes down to $10,000 at the end of the mortgage term, then your family will only get $10,000.  So, in essence, your potential payout decreases, but your monthly premium will continue to be the same since when you originally started the policy.

2)    The Bank is protecting their investment!  Think of this, what happens if the provider of the family dies, or becomes disabled?  The chances of the home going into bankruptcy or default are incredible.  Do you think the banking institutions want to pay money each month to protect their investment?  In so, the banking institutions are enabling the consumer to pay the insurance premium so they don’t half to!  What a great business decision, but maybe not a good decision for you.

There are companies out there in the market that are good, offering low rates per month, and offering solutions and options that are molded to the consumer.  Some of these plans have a lower monthly premium as the loan balance diminishes.  Some people prefer a simple life insurance policy.  By having a life insurance policy, the consumer doesn’t need to be concerned about the balance of the mortgage and can focus on the guaranteed payout.  Either way, if you a concerned family provider, you must protect your family from the reality of them losing their home after you pass away.  The sad story is, none of us think about that idea until something happens or, it’s too late.  It’s only pennies a day that can provide your family with the added security of having insurance long after your unable.  It’s worth having if you weigh out all the options of the program.  Things that are most important are, who has the lowest rate per month, who has the most coverage, and which company has the biggest payout in the event of death or disability.  All Mortgage Insurance quotes will fluctuate depending on the specific program that suits you.

Many homeowners or first time buyers may not realize, Mortgage Insurance Quotes are chosen by the lender, and not the customer.  It is also known as a mortgage guaranty and may be public or private depending on the lender.  Basically, the Lending Institution purchases this type of Insurance to protect the lender against default of the loan.  Typically, if you put down 20% or more on a home, you probably don’t need Mortgage Insurance.  The percentage may vary depending if the home is considered a first home, second home, or investment property.  It may also depend on the type of program.

Here’s a good example of when you need Mortgage Insurance and how to keep your payments lower:

Scenario 1 – You are purchasing a primary home on a 30 Year Fixed Program for a purchase price of $200,000 and you decide to put 10% down, take .50% to .60% into $180,000 (loan amount) which equals $900 to $1080 a year, divide into 12 months, comes to an estimated $75 to $90 a month.

Scenario 2 – You are purchasing a primary home on a 30 Year Fixed Program for a purchase price of $200,000 and you decide to put 5% down, take .80% to .90% into $190,000 (loan amount) which equals $1,520 to $1,710 a year, divide into 12 months, comes to an estimated $127 to $143 a month.

Comparing the two scenarios, Mortgage Insurance is cheaper and more affordable if you put more money down on the home you are looking to buy.

There are government type programs available for all homeowners that want little cash to purchase a new home.  For example, going FHA or VA are incredible programs that require little or no money down.  You can only use these programs on a home you will consider your primary home, and only home, at the time of purchase.  In order for you to take advantage of a VA Loan, you must be a qualified veteran of the U.S. Armed Forces.

Scenario 1 – You are purchasing a primary home and do not own another home at the time of purchase.  The Purchase Price is $200,000 and you would like to come up with little or no money.  FHA homes require the buyer to come up with 3% down equaling $6,000.  The seller can pay up to 3% of the purchase price towards closing costs and prepaid items such as insurance and reserves for property taxes.  So, the loan amount would be $200,000 minus 3% down, equals a loan amount of $194,000.  FHA has a Funding Fee of 2.25% of the loan amount, which equals $4,365.  The FHA Funding Fee can be rolled into the mortgage, making the loan amount $198,365.  The Mortgage Insurance is lower with FHA, making the percentage estimated .50% which comes to $992 a year, divide by 12 months in a year, equals an estimated $82.65 a month.

The FHA Program is a great program to use when you want to put a minimal 3% down and want a discount on a Mortgage Insurance quote.  Please remember, if you keep the home for a short time, part of the FHA Funding Fees’ unused portion may be refunded.  Either way, please make sure you get an Estimate of Closing Costs in order for you to determine the Mortgage Insurance Quote.