Buying a home is a major financial commitment. Depending on the loan you choose, you might be committing yourself to 30 years of payments. But what will happen to your home if you suddenly die or become too disabled to work?
Mortgage protection insurance (MPI) can help your family cover your mortgage – you can avoid foreclosure if you can no longer work to pay your mortgage due to terminal illness or disability.
Keep in mind that there are different types of mortgage insurance and MPI isn’t the same thing as . PMI is a type of protection that safeguards the owners of your home loan if you stop paying on your mortgage loan. Many homeowners assume that their PMI will cover their mortgage payments when they die. This assumption is incorrect. As the borrower, PMI doesn’t afford you any type of protection. If you can’t pay your mortgage and you have PMI, your home will still likely go into foreclosure. You will typically be required to pay for PMI if you take out a conventional loan with a down payment of less than 20%. You can only cancel your PMI when your equity reaches 20%.
When you take an FHA loan, you must pay both an upfront mortgage insurance premium and a monthly premium. Like PMI, FHA insurance payments protect the lender against default on mortgages. However, FHA mortgage insurance affords you no protection as the homeowner.
Since you never know when the unthinkable will happen, mortgage protection from uses a combination of life insurance products to make sure your loved ones will always have enough cash on hand to keep up with the payments or retire the mortgage.