Buying A Home Can Be The Single Biggest Purchase An Individual Will Ever Make
According to statistics released by The Canadian Real Estate Association 481,113 homes were sold nationally.
For most buyers, that purchase involves a substantial mortgage and years of debt.
It is important for homeowners to know that there are options when it comes to protecting their home and their family's finances from the unexpected.
Homeowners have the option of purchasing mortgage insurance from a lender when they get their mortgage or buying an individual term life insurance policy offered by an insurance company, which can be done at any time.
Individual term life insurance and mortgage insurance have different features, and many homeowners can benefit from purchasing a term life insurance policy instead of mortgage insurance.
Here are some of the primary advantages of term life insurance:
• No need to re-apply for coverage if you move or need to re-finance
With mortgage insurance, if the homeowner switches banks, moves, or sells their home, they will have to re-qualify for mortgage insurance. This could be a challenge if there have been any health changes, and the cost of insurance usually increases the older you get.
• You choose your beneficiaries and they decide how the money is used
With mortgage insurance, if the homeowner passes away, the lender will simply pay off the mortgage balance. In contrast, under an individual life insurance policy, the homeowner can choose one or multiple beneficiaries and the beneficiaries can use the insurance money to pay off some or all of the mortgage, or they may decide to pay other debts or living expenses.
• With term life insurance, your coverage amount does not decrease with your mortgage balance
With mortgage insurance, the coverage amount declines as the mortgage declines but the premiums stay the same. This means the insured gets less and less value for the premiums they are paying. For example, if a $300,000 mortgage insurance policy starts at $50 a month, it may seem like a good deal. But if the mortgage is paid down to $150,000 and the premiums remain at $50 a month, the policy offers significantly less value.
• Buying mortgage insurance from the bank may be convenient, but it could cost more
In general, the rates for mortgage insurance are often higher than those for term life insurance policies sold by insurance companies for the same coverage amount. For example, a equivalent 40 year old, healthy couple non-smoker purchasing $250,000 20-year term life insurance monthly premium $25@month during the intitial 20 year term versus the average of the monthly cost of mortgage insurance for a $250,000 mortgage from the Top Five Banks monthly premium $50@month*
*Based on available rates for a healthy equivalent 40 year old non-smoker, purchasing a $250,000 purchasing a First to Die 20 year term Life May in 2016. Top five banks based on the average of the rates offered by Scotiabank, BMO, TD Bank, RBC, and CIBC for mortgage insurance for the same equivalency obtaining a $250,000 mortgage as determined by Empire Life in a survey conducted January 2015 insurance cost was 50% more than traditional 20 year Term.
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