Personal Finance from the Broke Perspective
Don’t we love planning things? Whether deciding what clothes to wear at a conference to picking a vacation spot for summers – people prefer staying ahead of time. Unfortunately, no matter how much you plan, one can’t get hold of destiny. Life is unpredictable since you never know what happens the next minute. Alongside planning, consider preparing yourself for the best and worst times. You can seek financial security by making some substantial insurance investments. [Read more…]
One of the things that I’ve learned a little bit about since we bought our house, was something that I didn’t have a clue about when we first started looking. Heck, I didn’t even have a clue about it after we bought out house. Mortgage insurance was just something that the mortgage officer told us we had to have, so it got added.
For a long time, I just thought it was an annoying little fee that they (the lenders) added on to the mortgage payment to squeeze a few extra dollars out of me. In some ways, that’s correct. Much like any other insurance, it’s really only there in the case of a real need for it. If you don’t ever need it, it feels like you’re paying a bunch of money to someone for something you don’t need. If you do end up needing your insurance, though, it can truly be a lifesaver.
Unlike some of the other insurances you’ll buy, mortgage insurance doesn’t really protect you. With car insurance, or health insurance, the direct beneficiary is you. If you get into a car accident, your car insurance will help pay for repairs, and your health insurance will help pay for medical bills. With mortgage insurance, if you need it, it’s really the lender that will benefit. The way it works is much like any other insurance. But, when an accident happens, and you default on your mortgage, the insurance pays off the mortgage to the lender. It’s protection for the lender against default.
Generally, you only have to carry mortgage insurance until your loan-to-value is below 80%. Come up with 20% down payment, and you won’t even see it. Some lenders will automatically take it off of the mortgage once you fall below that 80% LTV, others won’t, so you need to keep an eye on the loan and make sure that it’s being removed when it should. Most first time home-buyers will have some form of mortgage insurance on their loan.
Is mortgage insurance an annoyance or a helper? I think it’s a little bit of both. You’re buying insurance which only benefits you in that it may allow you to pay a lower down payment than normal. It’ll mean that you don’t get the mortgage paid off as quickly as well since you’ll not only start with a larger loan, but have a chunk of your monthly payment siphoned off. It also helps in that it does help you get a loan with a lower down payment because it assures the lender that the mortgage will be made good should you default.
Do you have mortgage insurance on your mortgage? Do you think it’s more of an annoyance or a helper?
Way back in March, I mentioned that I was beginning to look into making some adjustments and doing some price checking. Somewhere in between there and here, life got in the way and I wasn’t able to get it done as quickly as I would have liked. I’ve finally caught up to it though and I’m glad that I did.
This story should be proof for the rest of you who don’t regularly compare prices on things. Never assume that you’re getting the best rate.
Our car insurance had been with State Farm. I have been a customer of theirs for close to a decade. As of August (when the home owners insurance renews) I will no longer be a customer. Why? Because, what I found in my checking is that they were tied for most expensive auto insurance. And the home owners wasn’t much better. Of course, your results may vary and the insurance company for us isn’t necessarily going to be the company for you. I know that when I originally signed up with State Farm, it was because the price comparison tool at Progressives website pointed to them as being the cheapest.
I find it ironic that the insurance company that we’re moving to is Progressive. We’ll be moving our Home Owners policy to someone else. Progressive was almost exactly 50% cheaper than State Farm. 50%!!! In fact, the total for 6 months for all three vehicles that we insure was just barely more than it was for just one of them at State Farm. That’s pretty incredible. A bit of trivium; our new ins. agent mentioned that he’s moved 11 clients from State Farm to Progressive in the last month or so, and that about 6 Progressive clients have moved to State Farm. I mention that to concrete the idea that the right insurance company for one person isn’t necessarily the right insurance company for another. With all the variables that they take into account, it’s hard to say which will be better unless you do some shopping.
Another interesting note from the adventure. Previously, I went to a State Farm agent and got my insurance. This time, I went to an insurance agency. They’re independent for the most part and have access to several insurance companies to quote from. That makes it much easier to shop around, as they will do most of the footwork for you. All you’ve got to do is check any companies that you’d like quotes from that the agency doesn’t have a relationship with. In our case, Allstate was probably the biggest one that the agency didn’t have to quote from. I used Allstate’s online quote tool and found it to be on par with State Farm.
So, lesson learned. Shopping around is good. It can help you find the best deal when you’re buying just about anything. But, if you’re buying a service, remember to shop around periodically and compare the service that used to be the best deal to make sure it still is. You just might do like we did and save 50%.