I have adapted the following from a recent Globe and Mail article on the same subject. I have decided to include it because it’s an issue not often considered by homebuyers in the early stages of home owning.
In addition it’s value-added knowledge that many realtors do not present to their clients as something they might like to consider. I am often guilty of this. However, it’s worth looking at even the basic options for those of you who are interested (apologies for the poor formatting of the table below)
Pete & Susie are a young co-habiting unmarried couple and have decided to buy a small condo. They decide to take a small mortgage mortgage for $100,000 with a 20 year amortization. Their parents have also helped them with a sizeable downpayment. Right now only one Susie is working , so in the event that the breadwinner falls sick or dies, they decide to insure the loan.
How much will it cost and what will be the benefit be upon death or at end of loan period?
| If they get | Benefit now | Benefit when they pay off the mortgage | Monthly premiums | Total they spend over 20 years |
| Mortgage life insurance | $100,000 | $0 | $9 | $2,160 – $2,380 |
| 25-year term life insurance | $100,000 | $100,000 | $8 | $1,880 – $2,070 |
Pete & Susie decide: To take the term life insurance because:
• The term life premiums are lower because Susie is quite young and a non-smoker. The mortgage life insurance, on the other hand, costs the same for everyone.
• The mortgage life insurance will ends in 20 years, when the loan has been effectively repaid. With the term life insurance, they get an extra five years of coverage.
• They might have the option to convert this to permanent insurance if their policy allows this.
While buying term life insurance to cover their loans is the right choice for Pete and Susie in this example, the correct insurance for you will depend things such as state of health (past and present), age, current life situation, and the length of time the insurance is required.
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Vancouver Fairview and Westside Real Estate Market
