Mortgage Payment Protection Insurance

[Double A]

Is it a scam or a worthwhile investment?

[YoungTulsan]

They were talking about it on Clark Howard once, and he basically boiled it down to you spending money to protect the bank.

If you have any equity in your home at all, that can be your insurance - just refinance if the SHTF.

[Double A]

quote:Originally posted by YoungTulsan

They were talking about it on Clark Howard once, and he basically boiled it down to you spending money to protect the bank.

If you have any equity in your home at all, that can be your insurance - just refinance if the SHTF.

I've heard similar things. What if you don't have any equity? Is it still just money to protect the bank? It seems like a good thing at face value, but the deeper I look into it, the more sketchy it seems.

[sgrizzle]

I have PMI becuase I didn't pay 20% down but I'd love to drop that. MPPI is just like what the credit card companies want to sell you, protection in case of unemployment. I would think it's a waste of money unless you think you may lose all income in the near future.

[tulsa1603]

quote:Originally posted by Double A

Is it a scam or a worthwhile investment?

You don't have a choice if you have less than 20% down or equity.  I don't think it's a scam, but it's not a worthwhile investment for the homeowner.

[cannon_fodder]

Standard wisdom is PMI is a bad investment.  It used to be called "Lenders Mortgage Insurance" but that term was too accurate, so they dropped it.  It covers potential losses of the LENDER on foreclosure.

There are variations on the theme of course, but in general PMI offers the borrower nothing but a chance to get a mortgage if the lender requires it.  Drop it as soon as you can.

[BierGarten]

This thread is a little bit confusing because people are talking about two different things.

PMI -- Private mortgage insurance is what every lender requires that you pay -- every month -- until your loan to equity (or loan to valuu -- depending on what the contract you signed says, you may be able to reappraise and get rid of PMI) is 80/20.  Meaning, if you borrowed $95,000 on a $100,000 home (i.e. made a 5% down payment) you would pay PMI until the loan principle became $80,000.  By the way, if you do an amortization table for that exact loan, you will see that you wouldn't get the principle down to $80,000 for a LONG time.

Mortgage Payment Insurance -- This is the stuff you get mailers about every once in a while from random insurance companies or credit card companies that, if you purchase it, will cover your monthly mortgage payments if you were to be disabled, unemployed or die.

So, PMI isn't something you have the option of "investing in".  You either have to pay it or you don't.  Mortgage Payment Insurance is an investment decision, and I am sure that there any many different views on whether its a good investment or not.  Personally, I would say having an emergency fund, if you can sock one away, would be much more fiscally prudent.

[Conan71]

Are you talking about PMI, or are you talking about credit life/disability?  Big difference between the two.  PMI is to protect the lender in event they foreclose and the balance is higher than what they can get for the house.

I've got mixed feelings on credit life/disability.  On the one hand, you can likely get a credit disability policy for about the same monthly premium rate as you would have for a general disability policy which would pay more.  Same with the life ins.  The credit life is usually a decreasing benefit term.  You can buy level term for less usually.

They used to offer a disability/unemployment benefit to make your house payment if you were laid up or if you got laid off and may still.

If you work in a risky industry, where you could be disabled and you don't have the discipline to pay into a monthly disability policy, might not be a bad idea to protect your home.

[cannon_fodder]

quote:Originally posted by BierGarten

This thread is a little bit confusing because people are talking about two different things.

Good call Bier.  I wasn't paying close enough attention to the TITLE of the thread and just read what was posted in the thread..  Thank you for the correct.

Agree with your more accurate advice too.

[jne]

Has anybody had trouble getting rid of their PMI after they've made their 20 or 22 percent (whichever it is)?  I have heard that it is a pain.  How about other options like piggybacking another loan for the 20 percent or lender offered alternatives?

Whoops, don't mean to hijack.  Mortgage payment protections sounds like the scam crap I get in my credit card bill every month.

[Double A]

MPPI's not PMI's, just for clarification.

[BierGarten]

quote:Originally posted by jne

Has anybody had trouble getting rid of their PMI after they've made their 20 or 22 percent (whichever it is)?  I have heard that it is a pain.  How about other options like piggybacking another loan for the 20 percent or lender offered alternatives?

Whoops, don't mean to hijack.  Mortgage payment protections sounds like the scam crap I get in my credit card bill every month.

Actually, by law your lender will drop PMI automatically after it hits 20/80.  You may have heard stories about how hard it is to rid of before 20/80.  Getting a new appraisal that proves increased value is one way people get rid of it early, but the ability to do that must be in your contract with the lender or the lender must have an informal policy that allows that.

[jne]

quote:Originally posted by BierGarten

quote:Originally posted by jne

Has anybody had trouble getting rid of their PMI after they've made their 20 or 22 percent (whichever it is)?  I have heard that it is a pain.  How about other options like piggybacking another loan for the 20 percent or lender offered alternatives?

Whoops, don't mean to hijack.  Mortgage payment protections sounds like the scam crap I get in my credit card bill every month.

Actually, by law your lender will drop PMI automatically after it hits 20/80.  You may have heard stories about how hard it is to rid of before 20/80.  Getting a new appraisal that proves increased value is one way people get rid of it early, but the ability to do that must be in your contract with the lender or the lender must have an informal policy that allows that.

Yeah, thats what I mean - w/ increase in equity.     I just can't stand the idea of paying PMI to a lender chosen insurer any longer than I have to - 'internal policy' I don't know that I'd be comfortable relying on that.

[Dutchie]

PMI protects the lender in case the loan goes belly up.

If you think you have 80% equity in your property, have an appraisal done and submit it to the lender with a request to drop the PMI.

[Double A]

MPPIs are the topic of this discussion, not PMIs.