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From: csg@pyramid.UUCP (Carl S. Gutekunst)
Newsgroups: net.consumers
Subject: Re: mortgage insurance
Message-ID: <23@pyramid.UUCP>
Date: Fri, 13-Sep-85 02:04:15 EDT
Article-I.D.: pyramid.23
Posted: Fri Sep 13 02:04:15 1985
Date-Received: Sat, 14-Sep-85 04:05:10 EDT
References: <252@mot.UUCP>
Reply-To: csg@pyramid.UUCP (Carl S. Gutekunst)
Organization: Pyramid Technology, Mountain View, CA
Lines: 43

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.
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