Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP
Posting-Version: version B 2.10.2 (Tek) 9/28/84 based on 9/17/84; site tekchips.UUCP
Path: utzoo!watmath!clyde!cbosgd!ihnp4!mhuxn!mhuxr!mhuxt!houxm!vax135!cornell!uw-beaver!tektronix!tekcrl!tekchips!stevev
From: stevev@tekchips.UUCP (Steve Vegdahl)
Newsgroups: net.consumers
Subject: Re: mortgage insurance
Message-ID: <212@tekchips.UUCP>
Date: Tue, 17-Sep-85 17:47:08 EDT
Article-I.D.: tekchips.212
Posted: Tue Sep 17 17:47:08 1985
Date-Received: Thu, 19-Sep-85 06:23:58 EDT
References: <252@mot.UUCP>
Organization: Tektronix, Beaverton OR
Lines: 28

> 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.


Brought to you by Super Global Mega Corp .com