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How does Mortgage Retention Insurance works?
Mortgage Retention Insurance
comes in many names such as Mortgage Life Insurance (MRI) or Mortgage Life
Assurance or Mortgage Protection Options etc just to name a few by insurance
providers here and abroad. MRI is defined as decreasing-term life insurance
policy taken by a mortgagor to repay the balance on a mortgage if the person
dies before its full repayment. In simple terms, it is designed to protect a
repayment mortgage as it will take out the previous balance or outstanding debt
for payment once the borrower is deceased and the main beneficiary of this
policy is the mortgage company or the lending institutions. MRIs are usually
tied in Home Loan application with Philippine banks or mortgage companies.
What are the differences of Mortgage Retention Insurances between Life
Insurances?
Both MRI and Life Insurances for
all, as they are give an added protection for you and your family in order to
give them a security in life if something happens like death or permanent
disability / terminal illness. In hindsight, MRIs can cover the biggest expense
left by a deceased breadwinner - the house. The cost of acquiring a home has
been steadily rising in the past decade now. Life insurance on the other hand,
will cover mostly the daily expenses from education, living cost and others
during the demise of the policy holder and time period of recovery of the
surviving family.
There are advantages and
disadvantages on an MRI as well, one is that they are expensive and than the
average term life insurances. MRIs premiums are usually incorporated into your home
loans in lump payment (one-time payment paid annually) it still means you are
paying finance charges. It is true that life insurance could beat the MRIs for
example if your life insurance coverage is P 2,000,000.00 against P 1,000,000
on the house you bought. MRIs drastically change on a yearly basis. Better to and
update from time to time if you already have an existing MRI. However, if you have a P 5,000,000 house and lot property
and you are only covered at P 2,000,000.00 you will definitely need an MRI. In
both ways they are both beneficial at the same time with added cost to fork out
but at a lesser expense as both financial products have different purposes.
I only have vacant residential lot, do I need to get covered with MRI
Yes, even if you only own a
vacant lot it still necessary to get one because you are still paying the
lending institution the borrowed amount of funds in your acquisition of a
property.
Is Mortgage Retention Insurance necessary for now?
Most of the young borrowers, they
would generally shrugged the idea of passing away. It has a negative notion to
most Filipinos but in general, an MRI will cushion the financial impact of
death on your surviving family members. The outstanding balance of loan
payments will be automatically given to mortgage or lending institution and the
home will be distributed to their heirs of the deceased policy holder. There
are some lending institutions that make the MRI optional but the majority of
commercial banks require their borrowers to have this type of insurance in case
of sudden demise.
Mr. Benedict Baluyut, is a
certified real estate professional (PRC Real Estate Broker) a regular member of
Registered Financial Planner - Philippines. He writes from time to time with
Registered Financial Planner Column at Business Mirror and MoneySense, a
Personal Finance Magazine in the Philippines. Catch him on Facebook page
Pinoymoneyvantage | Follow me on
Twitter | Add on Google+ or visit his
official blog at http://www.pinoymoneyvantage.net.Copyright 2008 - 2014. PinoyMoneyVantage| Personal Finance Philippines - Learn, Earn, Save and Invest.
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