Personal Finance

Life Insurance for mortgage

  • Last Updated:
  • May 27th, 2013 2:55 pm
[OP]
Newbie
May 17, 2013
9 posts
BRAMPTON

Life Insurance for mortgage

Do we need to have life insurance for mortgage ? Suppose, I need mortgage for 400K, do I need to have at least 400K of life insurance? Is this nice to have or mandatory in Ontario ?
19 replies
Deal Guru
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Mar 8, 2002
13086 posts
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GTA
No. No. No.
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( ͡° ͜ʖ ͡°)
Deal Fanatic
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Dec 14, 2010
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Do you have a spouse or someone that would be the beneficiary? If yes, it's nice to have, so they are not on the hook to pay the mortgage, if you were one the providers and die.

If you are alone, the home will foreclose.

Rod
Deal Addict
Jun 29, 2009
2307 posts
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Toronto
nashinfo wrote: Do we need to have life insurance for mortgage ? Suppose, I need mortgage for 400K, do I need to have at least 400K of life insurance? Is this nice to have or mandatory in Ontario ?
definitely not mandatory.

You'll probably want a LIFE insurance, but you don't want a MORTGAGE insurance.
ie. keep your insurance and your mortgage separate ! never get a life insurance that pays / ties to your mortgage, that's just plain dumb - i have no idea why would anyone ever go down that route.
Deal Addict
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Mar 29, 2008
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damnos wrote: definitely not mandatory.

You'll probably want a LIFE insurance, but you don't want a MORTGAGE insurance.
ie. keep your insurance and your mortgage separate ! never get a life insurance that pays / ties to your mortgage, that's just plain dumb - i have no idea why would anyone ever go down that route.
Unless perhaps you had medical/insurability issues...
Sr. Member
May 3, 2013
733 posts
391 upvotes
Toronto
Mortgage insurance is to protect the bank. If something happens to you and mortgage payments can't be made, the bank will have to reclaim the house, sell it (probably at a discount), and hope they cover the mortgage. Mortgage insurance ensures the bank won't lose a penny, I mean, nickel.

Say you have a wife, the mortgage insurance will pay off the mortgage, and your wife will have the house, mortgage-free. But what if the "something that happened to you" caused you to pass away in the house. The house will be worth much less than what was put into it, and your wife will have to sell it at a discount.

The wise thing to do if you have dependent(s), like others mentioned, is get life insurance that can COVER the mortgage amount (not pay the mortgage off). Let the dependent(s) decide what to do with the insurance money and the mortgage.
[OP]
Newbie
May 17, 2013
9 posts
BRAMPTON
Thanks for all response. So this is nice to have feature than mandatory. Can bank force client to take mortgage insurance or have life insurance from any company if the downpayment is less than 20% ? I think, it should be no, but just wondering why that bank representative asked me to have life insurance with in a month, as they are waiving the first month from their own. Need to figure out on Tuesday.
Deal Addict
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Aug 21, 2008
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West Side GTA
If you don't already have life insurance it's alright to take the mortgage insurance first...but after you get the mortgage....def. go seek out life insurance and call back in to cancel the mortgage insurance (thus you're always covered for the "Just in Case" scenario). That's what I did for a few months till I passed all my physical exams.
Newbie
May 20, 2013
17 posts
Toronto
Mortgage life insurance has the lender as a beneficiary, your premium remains the same but coverage declines. In a lot of cases that ive seen for my clients, the mortgage life ins is more expensive then regular life insurance!

So I do mortgages and life insurance (in addition to investments and income tax) and i would recommend that you get seperate insurance to cover you for any debt obligations upon your death as well as to provide living benefits for surviving dependants.

You can get more or less insurance (although I would recommend getting at least the same amount as the mortgage balance). You can also get a temporary policy to cover your for your dependent years.
Sr. Member
May 3, 2013
733 posts
391 upvotes
Toronto
nashinfo wrote: Thanks for all response. So this is nice to have feature than mandatory. Can bank force client to take mortgage insurance or have life insurance from any company if the downpayment is less than 20% ? I think, it should be no, but just wondering why that bank representative asked me to have life insurance with in a month, as they are waiving the first month from their own. Need to figure out on Tuesday.
If downpayment is less than 20%, then mortgage insurance is mandatory, usually provided thru CMHC.
Deal Addict
Jul 29, 2001
2005 posts
658 upvotes
Calgary
Dumb question.

I have a mortgage (3.5% fixed) that has about 1 year and less than $20,000 left. It's timed so that it will be paid off by the time the term is over on July 1st, 2014 as I decided to use my HELOC (promo 2.5% until this June) to pay down 20% of the original mortgage (from 2008) in January 2013 and last June. Each payment was $24,000 for a total of $48,000.

The reason I decided to do this is that the HELOC was a lower interest for a full year and I figured I would be able to pay off much more then my maxed out (base + 20% each payment) mortgage payment and saving for a lump sum. I managed to pay off and additional $10,000 by doing this that I would not have been able to as easy. HELOC is now under $40,000.

So reason I have posted is that I pay $30 a month in Mortgage insurance, and have since Oct 2004, because back then I was not savy to this stuff. I would like to cancel the mortgage insurance now that I only have a year left, but am I allowed?

I would save about $400 for what I consider something that is pretty useless now.

Thoughts?
Banned
Nov 27, 2006
2200 posts
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Toronto
MafiaHitman wrote: Dumb question.

I have a mortgage (3.5% fixed) that has about 1 year and less than $20,000 left. It's timed so that it will be paid off by the time the term is over on July 1st, 2014 as I decided to use my HELOC (promo 2.5% until this June) to pay down 20% of the original mortgage (from 2008) in January 2013 and last June. Each payment was $24,000 for a total of $48,000.

The reason I decided to do this is that the HELOC was a lower interest for a full year and I figured I would be able to pay off much more then my maxed out (base + 20% each payment) mortgage payment and saving for a lump sum. I managed to pay off and additional $10,000 by doing this that I would not have been able to as easy. HELOC is now under $40,000.

So reason I have posted is that I pay $30 a month in Mortgage insurance, and have since Oct 2004, because back then I was not savy to this stuff. I would like to cancel the mortgage insurance now that I only have a year left, but am I allowed?

I would save about $400 for what I consider something that is pretty useless now.

Thoughts?
Yes you can cancel any time.
Banned
Nov 27, 2006
2200 posts
444 upvotes
Toronto
nashinfo wrote: Thanks for all response. So this is nice to have feature than mandatory. Can bank force client to take mortgage insurance or have life insurance from any company if the downpayment is less than 20% ? I think, it should be no, but just wondering why that bank representative asked me to have life insurance with in a month, as they are waiving the first month from their own. Need to figure out on Tuesday.
Nash, NO YOU DO NOT HAVE TO HAVE INSURANCE (LIFE/DISABILITY) on ANY MORTGAGE. If the banker tells you you do need to have LIFE INSURANCE to get a mortgage, you tell them that is tied selling and to bring in their manager.

That being said, IF YOU DO NOT HAVE INSURANCE then mortgage life insurance is better than nothing.
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Feb 15, 2008
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Three types of "insurance" involved with buying a house:

Mortgage Insurance -- typically from an organization like the CMHC or similar for subprime mortgages -- protects the lender against default. Mandatory on most mortgages with less than 20% downpayments. Sometimes mandatory with even higher downpayments.

Fire/Property Insurance -- mandatory to protect the lenders' security interest in the property against loss due to fire, floods, etc. This is a condition of all mortgages, and failure to maintain this insurance is considered a default under most mortgage contracts.

Life Insurance -- Not mandatory, but completely optional. Protects a borrower and his/her family in the event of a loss or significant impairment in life, such that the heirs have enough money to, at the very least, continue making the mortgage payments in the interim.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Guru
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Apr 4, 2001
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Does not sounds like a good idea because it gives the wife more incentive to kill you to get the mortgage paid off.
[OP]
Newbie
May 17, 2013
9 posts
BRAMPTON
Well, went to bank to clarify the issue and confirmed that its not mandatory. It was mistake in their side to mention that as mandatory.
Deal Addict
Jul 29, 2001
2005 posts
658 upvotes
Calgary
I cancelled my Mortgage Insurance today. $30 in my pocket every month.

Thanks all.
Sr. Member
Oct 16, 2007
818 posts
44 upvotes
If you have a previous medical history such As heart attack or cancer, can you still get mortgage insurance? Will premium be higher if you qualified?
Newbie
Aug 29, 2012
23 posts
1 upvote
Toronto
nashinfo wrote: Do we need to have life insurance for mortgage ? Suppose, I need mortgage for 400K, do I need to have at least 400K of life insurance? Is this nice to have or mandatory in Ontario ?

It actually depends on their terms and conditions. Some lenders might require you to have life insurance enough to cover the mortgage, while some do not. However while they can request that you have life insurance, but they cannot force you to get that coverage with them. If so, that would be consider as tied-selling. You have the flexibility to shop around to a get better products and better rates.

Another note that many lenders are enrolling their clients into "Post-underwriting" coverage. That means the validity of the policy will only be verified at the time of the claim. In other words, just because you are paying premium now, do not necessarily means you have the coverage. This had already resulted in many claims being denied. If you are serious in getting the coverage to protect your family, I strongly suggest you to consider a getting a policy that would do the underwriting upfront.


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Comments are only for informational purpose and do not intend to provide any financial advice. Before making any financial decision, make sure to consult with a financial consultant.
Newbie
Aug 29, 2012
23 posts
1 upvote
Toronto
boumbo wrote: If you have a previous medical history such As heart attack or cancer, can you still get mortgage insurance? Will premium be higher if you qualified?
It depends on many factors such as how long did it happen? is the condition being stable? are you still under any medical treatment and follow up? and of course, it mainly based on the underwriter's decision. There could be chances that the premium is rated higher or the application is simply declined. However, you should consider getting a coverage where the underwriting is beforehand, and not afterward. That way, your family will not get any surprise should there be a claim.



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Comments are only for informational purpose and do not intend to provide any financial advice. Before making any financial decision, make sure to consult with a financial consultant.

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