Did your lender talk to you about Mortgage Insurance?

Protect what matters most, not just your house

When you buy a home, you need a way to help protect yourself and your family financially, no matter what happens.

Your bank/lending institution probably talked to you about mortgage insurance (also called creditor insurance) when you bought your house. It means if you die, your mortgage is paid off.

Mortgage Insurance vs. Individual Life Insurance:

But is mortgage insurance the best option for you?

If you want to protect more than just your home, individual insurance may better suit your needs. Individual insurance generally provides more control, options and benefits to help you financially protect what matters most.

By comparing mortgage and individual life insurance, you ensure you’re giving yourself and your family the type of insurance protection that meets your needs.

I’m a trusted professional who can help you build a financial security plan to help protect your mortgage and what matters most in your life.

All-in-One Life Insurance Guide

What can life insurance do for you?

  • Protect the people who rely on you
  • Build value you can access during your lifetime

What types of life insurance are available?

  • Term life insurance
  • Permanent life insurance

Who needs life insurance?

  • People who are supporting others financially
  • Young and healthy people
  • Single people
  • People with assets or an estate to protect
  • People who want to leave something to charity
  • Parents who want to set up their children for success
  • Business owners

When should you buy insurance?

What about other types of life insurance?

  • Mortgage or creditor protection
  • Group life insurance

How do you select the right life insurance for you?

  • Professional advice

Read this guide, and talk things over with me to better understand the choices you have with life insurance. Making the right life insurance choice today can help both you and the people you care about most in the future.

Life Insurance Planning Solutions

Help protect the people who rely on you

Life insurance is one of the best ways to help protect the people who rely on you. Buying life insurance shows you are Life Insurance Guidecommitted to creating a positive future for your loved ones and can reassure them that they will be taken care of.

When someone dies, loved ones left behind have to make important – and often difficult – decisions at a stressful time. Life insurance provides options for the people you care about, allowing them the time and financial help needed to make decisions. Insurance proceeds can be received within days. This money can be used to cover funeral costs and other expenses, such as:

  • Legal fees
  • Taxes
  • Outstanding medical expenses
  • Mortgage payments
  • Loan payments
  • Credit card bills
  • Child care

Life insurance can also help replace the loss of your income and help fulfill your future plans in your absence, such as funding a child’s education or your spouse’s retirement plans.

Build value you can access during your lifetime

Permanent life insurance provides an opportunity to grow cash value over time. You can use it to help you achieve your big goals in life: to supplement your retirement income, to help pay for your children’s education, to go towards starting a business, or leave as a larger legacy to those you care about. **

You can access this cash value in your life insurance policy several ways**:

  • Take out a loan
  • Make a cash withdrawal
  • Use it as collateral to help obtain a bank loan

What types of life insurance are available?

Term life insurance is temporary, low-cost coverage where your payments stay the same for a set period of time. When that time’s up you can renew your coverage at a higher cost or convert it to permanent life insurance without having to answer further health questions.

Permanent life insurance provides you with more security because it lasts a lifetime, as long as payments are made. It costs more than term insurance, but can grow money tax-free inside your policy over time (called cash value), which you can access while you’re still alive.*

Who needs life insurance?

Life insurance can help you, no matter what stage of life you’re in.

People who are supporting others financially

Whether it’s your spouse, partner, children, another family member or a friend, life insurance is a great way to help provide for the people who rely on you.

Young and healthy people

You may not think you need to have insurance if you’re young and healthy, but there are many advantages to buying it at this stage of your life.

  • Your payments for insurance will be lower when you’re younger, meaning you can afford more coverage. And that means a larger legacy for loved ones, or a charity you choose.
  • With permanent life insurance, it means more time to build up cash value.
  • Buying life insurance when you’re young ensures you have coverage if you later develop health issues. Single people Life insurance is an important part of your financial security plan. During your lifetime
  • You can use permanent life insurance to supplement your retirement income or support your long term goals.** After death
  • Proceeds from a life insurance policy can take care of final expenses, unpaid bills and other debts, or be left as a gift to a friend or loved one.

As a parent, you want the best for your children, but sometimes big dreams come with big costs.

People with assets or an estate to protect

Life insurance can play a very important role in preserving the estate you’ve built over your lifetime and can help you leave the most assets possible to your heirs. But as your estate grows, so can the burden of taxes and fees that may have to be paid when you die. Life insurance can help cover these costs, allowing you to pass on your estate as planned.

People who want to leave something to charity

Life insurance gives you the opportunity to leave a personal contribution to your favourite charity or nonprofit organization.

Parents who want to set up their children for success

As a parent, you want the best for your children, but sometimes big dreams come with big costs. Imagine being able to say yes to your child buying a car, traveling, having a dream wedding or purchasing a home because you’ve bought them permanent life insurance today. **

  • Any cash value that grows within the policy can be accessed during your child’s lifetime** and if it isn’t needed right away, your child can use it later to supplement their own retirement income.**
  • Buying your children life insurance now can help provide a lifetime of protection.

Business owners

When you own a business, your most valuable asset is your ability to create revenue. But what would happen if you or one of your essential employees suddenly died, creating a risk to your business? The ripple effect could be significant, jeopardizing your lifestyle and even those of other employees.

Protecting your business means more than just protecting its physical assets—it also means thinking about what will happen after you die. Will your heirs and any surviving owners be able to work together? Will your heirs need to sell the business to cover capital gains, probate fees and other costs?

Insuring yourself and your key people can help protect the business you’ve worked so hard to build. * If the accumulation stays within prescribed limits, the cash value is only subject to income tax when it’s withdrawn. **Borrowing or withdrawing money from your policy will reduce the policy’s death benefit and cash value.

When should you buy insurance?

Whether you’re just starting your career, supporting a growing family or preparing for retirement, life insurance helps you meet different needs at different stages of your life.

In particular, there are some key times when you should be thinking about your insurance needs, such as when:

  • Purchasing your first home or cottage
  • A child or grandchild is born
  • Starting a business
  • Succession planning
  • Taking on a new job
  • Getting married or divorced
  • A parent or spouse dies
  • A child leaves home
  • You’re approaching retirement

Mortgage or creditor protection

These are types of term insurance offered by lending institutions as part of their mortgage loan or line of credit products. They provide simple, low-cost insurance to cover the balance owing if you die before the mortgage or line of credit is paid off.

However, there are some important differences between mortgage, creditor and individual life insurance. When it comes to mortgage or creditor insurance:

  • The lender or mortgage broker owns the policy
  • Your coverage typically decreases as your mortgage is paid down
  • The insurance money can only be used towards the balance of your mortgage
  • Often, you can’t make changes to your coverage as your needs change
  • Your coverage ends when your mortgage or debt is paid off

Group life insurance

If you’re working, there’s a good chance your employer offers group life insurance. You may also have group life insurance through an association, professional body, union or club.

While this form of insurance provides simple, low-cost coverage, there are some important differences between group and individual life insurance.

  • Group life insurance normally provides basic protection or benefits. Unless you get added coverage, your insurance could be significantly short of your actual needs
  • Group insurance benefits are pre-set and not personalized to your specific situation
  • You’re often only insured as long as you’re part of the group
  • Employers own their employees’ coverage and can change it at their discretion, based on an annual review

What about other types of life insurance?

Get professional advice

Life insurance is definitely not one-size-fits-all and buying coverage that meets your current and future needs can be complex. That’s why professional advice is essential. I can advise you by:

  • Take the time to understand your personal financial goals, insurance needs, risk tolerance, and how hands-on you want to be in managing your insurance
  • Help you evaluate your options and select the type of insurance that’s a good fit for you now, and in the future

Mortgage Insurance vs Personal Life Insurance

You’re finalizing your mortgage – a huge commitment that comes with a great deal of responsibility. It’s natural to be concerned that your family might lose their home if the income earner was no longer around to make the payments.

You have a couple of options, both involving affordable monthly payments. Lending institutions offer you mortgage insurance – also called creditor insurance – at the time you sign the mortgage. The other route is personal life insurance that you can buy through me.

  • It’s important to research the differences between mortgage insurance and personal life insurance.

Mortgage insurance is convenient. You can apply for insurance coverage at the same time you’re getting your mortgage. This insurance is used to cover the outstanding mortgage balance if you die. You can also include your spouse in the coverage.

Mortgage Life Insurance

However, it’s important to research the differences between mortgage insurance and personal life insurance to help ensure you’re giving yourself and your family the type of insurance protection that meets your needs.

You do have to qualify for personal life insurance, a process that may include verification that you and your spouse are in good health. Once you start paying the premiums, you’re covered for the term of the policy, with automatic renewals. And as long as premiums are paid as required, only you can cancel the policy.

The benefit payout

With mortgage insurance, your creditor is the named beneficiary and the proceeds are paid to the creditor, not your family. If you or your spouse dies, the outstanding amount is paid off. As the mortgage is paid down the benefit coverage decreases.

Personal life insurance allows you to choose your beneficiaries. And the lump-sum benefit payment is paid tax free on the death of the life insured even if the mortgage is paid off. This type of coverage provides added financial security beyond just the mortgage.

Monthly premiums

With mortgage insurance, the coverage decreases each month until the entire principal is paid off and the premiums stay the same. With personal life insurance, your coverage doesn’t decrease as the mortgage is paid down and you can choose a plan that will keep the premium you pay level for 10, 20 years or for your lifetime.

Flexibility

Generally, most lending institutions offer non-convertible term life insurance where the lending institution owns the mortgage insurance policy. If you switch mortgage lenders, your policy is void. Given that you’ll be older than when you originally signed your mortgage or your health may have changed, the premiums with a new lender could be higher or you may not qualify for new coverage.

If you already have a personal life insurance policy in place and you buy a bigger home, you may want to consider increasing the coverage. One option may be to leave the existing policy in place and take out a second one to increase overall coverage for your family.

Take time to compare and carefully weigh both options. I can provide expert guidance.

Are You Ready to Dive into a Mortgage?

All homeowners dream of burning their mortgage papers after making that final payment. Smart planning and prudent decisions will help make that day arrive sooner than you’d think.

However, before plunging into the real estate market, you should estimate how much you can afford. There are many online tools that can help you do this.

Lenders want to make sure your total monthly housing costs – including mortgage payments, taxes and utilities – do not exceed one-third of your household’s total gross income and that your total debt load (including car loans) is not above 40 per cent of your household’s total gross income. All lenders have software programs that can compute how much they’re willing to lend and how much house they expect you can afford to purchase.

That first big payment

A big down payment could be a great way to reduce the size of a mortgage. But people who don’t have a lot of money saved – and don’t want to wait to build a larger down payment – can take on a high-ratio mortgage. Borrowers in Canada with less than a 20 per cent down payment must purchase mortgage insurance, which protects the lender in case of default. This could cost up to 3.35 per cent of the value of the mortgage and typically gets tacked onto the principal.

Options to consider when choosing a mortgage

It’s important to consider these topics when choosing a mortgage:

  • Fixed or variable interest rate
  • Amortization period
  • Length of term
  • Open or closed

The fixed-versus-variable-rate decision has long been debated. A few years ago, Moshe Milevsky, a professor at York University, authored a report which suggested prospective homeowners go with a variable interest rate mortgage.1 But since variable rates could go up any time, many borrowers opt for the more stable fixed-rate mortgage.

Today, the advantage of variable rates is uncertain. Yes, they remain below fixed ones, but the gap has become razor thin – to the point where potential savings may not justify the risk of variable rates climbing.

Risks not so variable

For small increases in the variable rate, the payment size may remain the same. The only difference would be an increase in the amount going to pay the interest portion. However, if rates increase significantly, even by 1.5 per cent, the lender may increase the payments.

Before deciding on a variable rate, make sure the lender explains all of the possible scenarios. Specifically, find out what interest rate changes will trigger higher payments. You may be able to include the option to lock into a fixed-rate mortgage at any time, but keep in mind that by then the longer-term rates may have changed.

Fortunately, you can use a mortgage calculator to easily determine the savings of going variable versus fixed. You may decide that the upside isn’t enough to forgo the certainty provided by a fixed-rate mortgage.

Mortgage

Coming to terms

Mortgage terms can range from six months to 10 years. Generally, the interest rate rises with the length of the term.

The advantages of an open mortgage

Fixed-rate mortgages are generally closed. They typically allow for yearly lump-sum prepayments up to 20 per cent of the original mortgage, depending on the lender – a very important detail you ought to confirm before signing. You may also be able to increase your regular payments, as much as doubling them – perfect for people with steadily rising incomes.

Paying off the mortgage all at once or breaking it up to get a better rate often triggers financial penalties. Some lenders do offer open mortgages, which allow borrowers to pay off some, or all, of the loan at any time. However, there’s a catch: the interest rate may be significantly higher.

If there’s a chance you’ll come into some money or sell the mortgaged home before the term expires, an open mortgage could make more sense. If you plan to move before the term expires, a portable mortgage (one that can be transferred to your next home) may also be an option worth considering.

  • Of all the variables to choose from, a shorter amortization period offers the fastest route to a mortgage-burning party.

Which should you choose: A long or short amortization period?

Of all the variables to choose from, a shorter amortization period offers the fastest route to a mortgage-burning party. By law, Canadians can negotiate a mortgage that extends to 25 years. Long amortization periods are popular, especially with first-time homebuyers, since they could lower the amount of each mortgage payment. However, those lower payments could come with a price – higher interest rate costs.

Anyone taking out a mortgage ought to become very familiar with a mortgage calculator. Try plugging in shorter amortization periods and compare the increase in payments with the drop in interest costs. The sweet spot is often around 20 years, where the increase in payments isn’t so big but the savings in interest costs could be significant.

Accelerated payments could help you pay off your mortgage faster

You can pick weekly, bi-weekly and monthly payments, depending on the lender. More frequent payments will mean you’ll pay less interest over the life of the mortgage with the same interest rate.

You can also opt for “accelerated” payments that shave time off your total amortization period. While giving your lender payments a few days earlier doesn’t save much interest, accelerated payments can increase the total payments you make each year­ ­– helping you pay off your mortgage faster.

If you value simplicity, increase your total annual payments but add them up and divide by 12 to compute the equivalent monthly payment.

It’s time to get started

Once you’ve decided to purchase a home, consult with me, I can show you how and why you should build your mortgage into your financial security plan.

Protect What Matters Most With Life Insurance

When you think about protecting those you care about – your spouse, children, family members – you’ve probably considered life insurance.

But you might have wondered, “Can I afford it?” After all, life insurance is expensive, right?life-insurance-cup-coffee-day

Surprisingly affordable

If you can buy a cup of coffee each morning, you can probably afford to protect your family with term life insurance.*

If the unexpected does happen, your family can use the proceeds to:

  • Pay off large debts, like a mortgage
  • Cover daily living expenses
  • Continue plans you’ve made for the future, such as an education fund for the kids

Life insurance proceeds help ensure your family members are provided for and can achieve their long-term goals, even if you’re not there to support them.

Talk to me today and start protecting your family for less than the cost of a daily cup of coffee.

The example provided is not complete without the London Life illustration, including the cover page, reduced example and product feature pages all having the same date. Read each page carefully as they contain important information about the policy
*This comparison is based on London Life term 10 life insurance, male and female, up to age 40, non-smoker, standard risk, monthly premium payments. Monthly premium depends on your age, amount of coverage and general health information. Life insurance coverage amount represents the policy’s death benefit. Rates as of November 2014. Term 10 life insurance premiums increase on renewal after 10 years. Cost of coffee is based on $1.60 per cup.