My mortgage comes with MPI, PMI, MIP? What's that?
What Is MPI (Mortgage Protection Insurance), and Is It Right for You?
Buying a home is a big deal, right?
It's actually the biggest deal of your life.
It's also the biggest investment of your life.
So you want to be insured in case anything happens.
Right?
A mortgage involving decades of payments.
But have you thought about what happens to your home if something happens to you?
Will your family be able to pay the mortgage if you are not there?
Mortgage Protection Insurance (MPI) can help in tough times, ensuring that your family can keep the house even if you can't work or, in some cases, if you pass away.
Let's dive into what MPI is, what it covers, and who might consider it.
Understanding Mortgage Protection Insurance
MPI is a type of insurance that helps your family with your monthly mortgage payments if you, the policyholder and borrower, pass away before fully paying off your mortgage. Some policies also provide coverage if you lose your job or become disabled due to an accident. Many people call it mortgage life insurance because it typically pays out when the policyholder dies.
MPI vs. Other Types of Insurance
Keep in mind, MPI isn't the same as Private Mortgage Insurance (PMI), which safeguards your lender if you stop mortgage payments. PMI doesn't protect you in case of your unexpected passing. You usually pay for PMI when you have a conventional loan with a down payment less than 20%, and you can only cancel it once your equity reaches 20%.
MPI is also different from mortgage insurance on Federal Housing Administration (FHA) loans. FHA insurance, or MIP, protects the lender, not you as the homeowner, in the event of your unexpected death.
Mortgage Life Insurance vs. Traditional Life Insurance
MPI works similarly to traditional life insurance policies. You pay a monthly premium to keep the policy active, and if you pass away during the policy's term, your provider pays a death benefit that covers a set number of mortgage payments.
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One key difference is the beneficiary:
MIP & PMI typically pays the mortgage company, not your family.
MPI provides a lump sum to your beneficiaries, which they can use as needed, usually to pay the mortgage...
Policy Rules and Regulations MPI policies may have conditions, such as the death benefit matching your outstanding mortgage balance. As you make mortgage payments, your outstanding balance decreases, so the policy's value declines as well.
MPI companies might also have rules about when you can buy a policy.
Most require you to buy it within 24 months after closing, with some allowing up to five years. The policy may also be age-dependent, making older homeowners more likely to receive payouts.
Where to Buy Mortgage Protection Insurance
You can buy MPI from your mortgage lender, private insurance companies, or life insurance providers. Or text me (424 466 84 88)
Act fast after closing your loan because there's often a limited window for purchasing MPI.
If you miss it, consider term life insurance instead.
Is Mortgage Protection Insurance Worth It?
It's always a good option!
But it also depends on the costs and on your specific situation. MPI is the best option if you have health issues, work a high-risk job, or struggle to get traditional life insurance. However, if your family may need the insurance payout for more than just the mortgage, traditional life insurance might be a better choice.
In any case, don't do it alone, ask for professional advice...
Xavier Lannes