Should I Insure my Mortgage?

Buying a house is a big step and it scares a lot of people. This is mainly because the mortgage that you have to take out to buy the house is a major investment that lasts for a long time. When you buy a house in St. Louis you will probably be offered the chance to buy insurance for your loan. This raises the question of whether or not it is a good idea.

In a lot of cases you won't actually have choice when it comes to whether or not you should insure your mortgage. If the down payment that you make is less than twenty five percent of the amount that you are paying for the house you will be required to have private mortgage insurance. This is to protect the lender in the event that you can't make your payments. All St. Louis mortgage lenders are going to require this insurance if your down payment is not high enough so in this case you will have to insure your mortgage.

This raises the question then about whether or not you should insure your mortgage if you do have enough money to make your down payment. This can get more complicated since it is going to depend on your situation. That being said it is pretty clear that you shouldn't choose to use private mortgage insurance if you don't have to. This is the insurance that people who make small down payments have to make and it is a bad deal since it is charged as a percentage of the mortgage. In fact if you did have to take private mortgage insurance you should seriously look at refinancing as soon as you have enough equity in your home that you can avoid having to pay the insurance.

The time when you do need to insure your mortgage is when you have dependents that rely on you to pay the mortgage. In this case the best way to do it is with life insurance. This is really the only way that you should be insuring your mortgage. It is to make sure that if you are not around to pay the bills they will be taken care of. Any other type of insurance policy on your mortgage is a waste of money.

In fact you really shouldn't be using your life insurance to insure your mortgage either. Your banker will likely try to sell you on a policy that will pay off your mortgage in the event that you die. This is a great deal for the bank, you pay the premiums and they get the money. In reality it would be better if you had a life insurance policy that paid the amount that is required to pay off the mortgage to your beneficiaries rather than the bank. This will give them more options about what to do with the money.