Why You Don’t Need Mortgage Life Insurance

By Nora Dunn on 27 February 2008 (Updated 22 June 2011) 37 comments
Photo: Paolomargari

When you signed for your mortgage, you were offered mortgage life insurance for mere pennies a day. If you chose to decline it, you had to sign all sorts of liability forms declining said insurance, which no doubt made you second-guess your decision, and possibly change it.

 

There are several reasons why declining the bank-offered insurance is advisable in favor of an individual life insurance policy:

 

When you signed for your mortgage, you were offered mortgage life insurance for mere pennies a day. If you chose to decline it, you had to sign all sorts of liability forms declining said insurance, which no doubt made you second-guess your decision, and possibly change it.

 

There are several reasons why declining the bank-offered insurance is advisable in favor of an individual life insurance policy:

 

Mortgage Life Insurance Insures the Bank, not You

Okay, so your life is in the lurch, but your family doesn’t actually see any of the life insurance proceeds should you die. The bank is the beneficiary of the policy. So the good news is that your estate is absolved of its mortgage liability when you die. But the bank is truly the winner here – they get their money. And for this, you get to pay the monthly premiums.

Individual Policy: If you had higher interest credit card debt for example, your family could choose to pay that off instead and carry the mortgage. Choices abound with an individual policy.

 

Mortgage Life Insurance is a Decreasing Benefit with Level Premiums

Mortgage life insurance pays off the balance of your mortgage. And if you are paying it off responsibly, that amount will decrease as the years go by. However your premiums remain the same. Some would argue that this is accounted for in calculating the premiums, however I have sifted through many quotes and illustrations, and not found this to be the case.

Individual Policy: Standard term life insurance will offer a level benefit for the term. You pay “x” dollars a month, and if you die your beneficiaries will receive “x” dollars. Period.

 

 

ARTICLE CONTINUES BELOW

Changing Mortgage Lenders Means New Underwriting

At the end of your five year term (for example), you decide to switch your mortgage to another bank offering better rates. However if you want the life insurance option, you will have to succumb to the medical questionnaire and underwriting process again. If something has happened to affect your insurability during this time, you could well be declined.

Individual Policy: Most term life insurance has a renewability clause. Under the terms, you have the option of renewing the insurance at the end of the specified term (eg: 10 years), but at significantly higher rates. The premise of this is that you are guaranteed to be insurable (until age 65 or 75 for example), but will pay increasing rates at each renewal. If instead you reapplied at the end of the term for a new policy and are healthy, you would get much lower rates. But if something had indeed happened to you to affect your insurability, with the renewable clause at least you still have some coverage.

 

 

You may say “oh, but xyz well-known insurance company is offering the insurance through the bank – it’s not just bank insurance, it’s an individual policy. I get paperwork and everything”.

Although ‘xyz insurance’ is underwriting the policy, and although you know they offer individual policies , if you sign for it through the bank it is still mortgage life insurance. The issue here is not the insurance company; it’s the product. Don’t be fooled into thinking that your mortgage life insurance policy is a suitable substitute for your own individual life insurance policy. Do a proper needs analysis (preferably with your financial planner), and cover off the exact amount of life insurance you truly require.

 

 

Disclosure: The author has no personal vested interest in either form of insurance.

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Guest's picture
Guest

I also found out that should you need a hard money broker in WA state, DONT USE Marty Sweeten or his company Hard Money Placement, llc.

Marty Sweeten will take your personal information then never get back to you. He lies and curses on the phines when caught. Sweeten, Marty. Sweet Marty

Guest's picture
Poliwonk1

I completely disagree. I have been dealing with Marty for about 4 years.
Even when he can’t help me, he gives me ideas on where to take the deal.
Not only that but he actually answers the phone and has manners, unlike most hard money lenders.
You either caught him on a bad day or did something to offend him. Just my opinion.

Guest's picture
Guest

He's not doing what he's required. He's not licensed in WA state to do Real Estate or Mortgage Brokering or Loan Originating. He mass faxes people and when you call him to get removed from his list he laughs and says "Get a life" and slams down the phone. This is a violation of State Law and the F.C.C. There are ways of getting this handled and if everyone would report him life would be better for all of us in this business.

Guest's picture
Poliwonk1

I don't really know about all that but he has closed over 10 of our companies loans! Loans that we would otherwise have had to turn down. Everyone here loves him. He has come into our office and given talks on a few occations. What impressed me about him is that even if they couldn't or wouldn't do it, he would tell you who would.
He is commercial and doesn't do sfr's (at least, I don't think he does) so I don't think he is a mortgage broker. That would explain the license thing. No offense maybe you're new to private money. its different, It's not like a bank loan. You have to roll with the punches on them. You don't always get them done but it's better than just saying no to those types of deals.
One more thing...The part about him saying "get a life" and slamming the phone down is just something you got from another post. I know because before I sent him a loan I asked him about it. That was several years ago. You should give him a chance and don't believe everything you hear or read on a post. I am not trying to lecture you but it just seems like it's so easy now a days to trash people without any regard to who your doing it to. End of speach. Best.

Guest's picture
Guest

I have just received a Letter of Interest from Marty on project in Salt Lake City. It seems that you have had favorable dealings with his company. Any further comments or recommendations?

Guest's picture
Guest

To everyone who has been lied to or have had funds embezzeled (ie inspection fees or any other fees) by Marty Sweeten at HMP Incorporated in Puyallup, WA.
If you have wired or deposited any money into his Wells Fargo account 0774, he will take your money and you will never hear from him. He has just did this with me, the property was suppose to close a few days ago and up until then he said the money was there and waiting on inspection. But low and behold he is not taking any calls or returning them. I have looked on other bogs and I am not the first person he has done this to. This guy needs to be stopped and I am going to the Washington State Attorny General's Office here in Olympia to start a class action law suite against Marty Sweeten. If you would like to become part of this suite please contact me at prprtyrental@aol.com I have been doing business in real estate for over 20 years and have never dealt with such an under-handed bottom feeder.

Guest's picture
Nancy Chang

I have closed 3 deals with Marty and have always found him to be polite, to the point and fairly quick.
He is honest on deals he cant do and has even referred me to other lenders who could do files he couldn't.
I think your experience is not typical. I was referred to him by a friend who swears by him as well as their whole office.
My email address is nchang134@hotmail.com

Guest's picture
Guest

Marty is dishonest, says you have an approval, tells you to send the money, then does not deliver and will not return calls.

Guest's picture
Clint Bradshaw

We were in a very similar situation about 2 months ago with Marty and would be more than happy to join your law suite against him. We can provide any documentation necessary to help out the case. PLEASE contact us at this email.

Guest's picture
Michelle Solomon

Hi,

I am a broker in Hawai. I submitted a loan to HMP and rec'd a conditional approval asking for $1800 from my borrower. When I tried to search the WA state website for licensing info, I couldn't find anything.

Your blog is the only thing I could find. You mention that you saw other blogs, too, but all I saw was disgruntled people getting faxes from HMP.

I am just trying to see if these guys are legit. You don't think they are. Did you ever get any other responses from other brokers, good or bad?

thank you,

Michelle Solomon
Paradise Home Loans, Kona
808-325-6898

Guest's picture
Guest

I was recently working with a broker on two hard money loans that had been "conditionally approved" with hard money placement inc. I was told the loans would close within 14 business days and that I needed to deposit $2400 right away for "due diligence fee" in order to get them working on the loan. After 24 business days had came and went with the same answer, a few more days, I realized I had been scammed. The broker claimed he couldn't contact the lender. After I learned the broker had been lying and stringing us along I emailed Marty Sweeten to get the real story. Marty gave me a brief explanation that it was the brokers fault for not telling us we didnt pass the value part of there due diligence process. Marty said he would have another department in his company reopen our files if I wanted. I said yes and emailed the name of the person he told me I needed to contact. I emailed the contact Sarah for her to tell me that she would need appraisals, 1003's and other financial statements. Isn't that what the $2400 due diligence was for? I emailed Marty once again to ask. Well you can guess what happened. Never heard from this company again. I am looking to talk to anyone who this has happened to so I can file a lawsuit as well.

Guest's picture
giftwrap

Good article. The key is to take proper advice like you mention.

Guest's picture
Dan

I have also had solid experiences with him. As far as him slamming the phone and telling you to get a life, that does not sound like him. He is flexible and helpful with deals.

Guest's picture
Dan

I have a deal pending with him. He has been professional and on top of things form the beginning. He even took the time to speak witht he borrower I would give him a chance.

Guest's picture
Guest

Can somebody who has been treated for Cancer get mortgage life insurance?

Thanks.

Nora Dunn's picture
Nora Dunn

That's a good question. In some cases, yes, but you will have to pay a higher premium. Depending on the type of cancer and if it was fully eradicated, any life insurance company will consider your application if a certain number of years has passed and a pathology report is produced during the application process.

Mortgage Life Insurance varies in their ability to accept cancer patients. Some will decline the application outright, and others will consider the application as above. Check out your options - you may be insurable.  

Guest's picture
Guest

Marty did the same to my client and we just got a call from another broker where the same thing happened to her client

He promises the world.. issues a bogus letter of interest to get the client to pay then disappears. You can't get him to call or return emails. Once you get heavy handed with him he finally replies and to tell you because you demanded a response from him he is killing the loan and then refers you to his attorney.

This guy needs to be stopped. I'll definitely be in touch with you. I feel like billing this clown for my time and energy wasted because of fraudulent claims that he leveled about his ability. i have lost clients and my rep. has been tarnished.

Wa

Guest's picture
Guest

Just closed a rehab deal in N.J. It took about 30 days (2.5MM) He was fine with us.
Up front fees are the norm with a lot of private lenders.

Guest's picture
Guest

Would you be so kind as to let me know how I would contact you to confirm your experience? Please let me know, as it would certainly aid in how I proceed. Thank you.

Guest's picture
Terri

All those guests who have had a GREAT experience with Marty and Hard Money Placements, why will you not provide your name, company website and email address?  Just curious why you'd take the time to give glowing recommendations, but will not leave your contact info.  Anyone I or my company gives recommendations, we provide all our information for people to check back with us to verify.

Guest's picture
Guest

Hard Money Placement, Inc is a small private consulting corporation. We were founded in 2004 originally as a conduit between brokers and private investors including some institutional lenders. Since then we have grown and branched into other types of projects with success particularly in the N.W. and N.E of the U.S. We look at about 120 deals per month and accept about 25% of those. Over the last 4 years or so, we have made many customers happy but invariably, there will be some that are not happy.
Normally complaints that I see on message boards are typically of an immature nature. Ranging from not returning phone calls (I do the best I can) to making promises that we didn’t keep. Let me take this opportunity to tell every broker and prospective client out there that if someone at this company or another like it makes a promise about if and when a deal will wrap up, they are lying. It is not possible to give assurances when you don’t control many of the variables. We don’t do that. We are constantly pushed and begged for dates and statuses by brokers but we will not provide assurances until closing docs are cut and on their way. The best we can do is to explain the process and give a normal time range.
Normally I ignore the negative comments but I feel that these last two regarding our Due Diligence Fee have to be addressed. Most of the projects that we see are in fact fraudulent with either the appraisal or the deal should have never been originated at all for a variety of reasons. We used to spend many man-hours on a project just to find out later that, for instance, the soil was contaminated, or one of the 5 parcels were on leased land and someone at the title company screwed up. This went on and on. So because HMP is not a nonprofit, the DD fee pays for personnel costs during this process. Additionally, we may order reports for info not covered in an appraisal like: Crime in the area, what permits have been requested and approved near the subject property (this goes to growth), if there is a builder, are they state-skipping. This is done to protect all those on the backside of the deal.
It is unfortunate when a broker or client is unhappy with our performance and it drives me to always be improving, but this will happen from time to time.
The fact two over-the-top comments impugning our (or my) character came without signature goes to show that they are bitter and upset that their project didn’t close. Why didn’t they put their names down? Are they even real or are they competitors? If I were taken advantage of, you can bet I would put my name in bold letters.
This is an open invitation all brokers to try us and see if we don’t give your deal a fair shake. We will entertain: land, commercial and construction. I can be contacted at: martysweeten@gmail.com
Thank you

Guest's picture
NW Guy

If you have an experience with regard to Hard Money Placement or with Marty Sweeten pertaining to a loan transaction (either a positive outcome or a negative outcome), I would appreciate hearing from you. Please email me your story with contact information to NWGUY2005@gmail.com. We are simply compiling information at this time. Thank you.

Guest's picture
AJ

Nora, I am a divorced male, 65 years old, lives alone. My home is worth approximately $325,000. in a depressed market, considerably more in a "normal" market.

My mortgage totals approximately $280,000.00 I have private life insurance for $200,000.00.

I've read what you have said regarding the inadvisability of mortgage life insurance. However, if my goal is to leave my children my home free and clear of any mortgage obligations, would I be better off cancelling my life insurance, which will not cover the remaining mortgage balance, and taking out a private mortgage life insurance policy which will leave my home free and clear to my four children to divide? The sale price of my home will most definitely exceed the $200,000.00 life insurance I presently have.

Thank you for your advice,
AJ

Nora Dunn's picture
Nora Dunn

@AJ - Here's another way to look at it: instead of canceling your personal insurance and taking out mortgage life insurance, why not either increase your personal insurance or take out a new policy to cover off your mortgage? In keeping with the points in this article, if you can swing it this will provide you (and your kids) with the greatest security and ease of estate planning overall.

Guest's picture
AJ

Thank you Nora.

So I guess what you're saying is that it would make better sense to leave my personal life insurance as is at the present $200,000.00 and just take out a Mortgage Life Insurance Policy for the difference between that and what I owe on my home which is $280,000.00?

Nora Dunn's picture
Nora Dunn

@AJ: That might be a way to do it, if you wish. Do a cost comparison, and see where that takes you. I was implying that you should hold all your insurance as a personal policy or policies, but if it is cost-prohibitive and the fine print on a mortgage life insurance policy looks decent, doing it the way you say above could work. There is never a cookie cutter solution; age, medical history, general health, and cash flow all need to be taken into consideration. Good luck in your research.

Guest's picture
AJ

Again, thank you for your help and advice.

I'm going to start doing a cost comparison researching the difference between what a mortgage policy and another life insurance policy for that $80,000.00 difference would run me.

Guest's picture
NW Guy

I just wanted to update everyone on the status of my request 3 months ago for anyone to send me their story (positive or negative) regarding dealings with Marty Sweeten. I have received 7 replies with email to confirm the story and all have been negative outcomes. I urge ANYONE with a positive outcome to email me at nwguy2005@gmail.com and share that with me. I only ask that you be willing to give some details so I can confirm the story. It appears that the "positive" remarks above are either Marty himself or someone he has asked to post in order to add credibility to his company. I will update this again in 1 month. Thank you.

Guest's picture
Guest

I am yet another victim of Marty Sweeten. However, now he is getting smarter. He is frequently changing his name and his company names because he has gotten so much bad press. He was recently New Castle Equity, and after he took my $1,800 in "inspection fees", and I figured him out (a little too late unfortunately), they pulled the website and he was never to be heard from again. A new company is Private Equity Suite. He just keeps changing the company name, builds a new canned website, and rents a virtual office in a random city in the U.S. Oh, and beware of the website he created called "Broker Black List". He put me on there as a broker who was hard to deal with. What an idiot. I was the consumer that got scammed! We need to stop this guy!!!

Guest's picture
Guest

I know him and have used him with mixed results but I have to ask you, how do we know that you aren’t' in fact M.S.?
You don't sign your name but you expect everyone to chime in and spout off. This is a small industry and I need M.S. more than I need “NWguy”.
Sorry but unless you're willing to man-up and tell us who you are, I can't help you. You could be just a competitor or even him trying to see who says what.
P.S. I know him better than you or anybody else. I started at the same company as a rookie with him about 15 years ago.
you can contact me at sueweetdeals@yahoo.com

Guest's picture
Terri

SueSweetDeals@Yahoo.com -- what not a legitimate business email address?  Just curious how you can ask for name, etc., when all you provide is a yahoo address that anyone could set up.  Legitimate people at legitimate companies have legitimate corporate email addresses.

Guest's picture
R.P.K

I am soon to be 59 and was diagnosed with prostate cancer in 2002. I had surgery then and my doctor gave me a clean bill of health. I never had any recurrence and I feel fine. I have been rejected by all life insurance companies that I have applied for. Is there one that you know that will accept to insure me?

Thanks

Nora Dunn's picture
Nora Dunn

@R.P.K. - Many insurance companies will insure you after a certain amount of time has elapsed since your surgery with proof of your clean bill of health. That time frame varies, but is often about 5 years. When was the last time you applied? 

Guest's picture
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Guest's picture
Ramona Simson

A friend of mine told me about a site that offer 40% discount on health insurance.I tried this company.They are great.You can check their site.

www . MyBestHealthInsurance . Info

Guest's picture
Guest

While the above may be true, it still makes sense to include the life insurance offered with the mortgage. You're not doing this to MAKE money, but to make thing easier for your family if something happens to you. My friend's spouse just passed away unexpectedly a few days ago. Still young and in good health, such a shock. I don't know yet if they had this kind of insurance, but hoping they did as it will make things so much easier for my traumatized friend. PLEASE...get this kind of insurance if you buy a house, esp the larger the mortgage.

Guest's picture
Becky Nickers

I'm not so certain this is a great idea. You need some kind of life insurance to cover a mortgage. I saw first hand what can happen when you don't. My father was taken from us at only 56 years old, and he did not have any life insurance. My mom struggled to pay the mortgage and now lives on social security. I just got a life insurance policy from LifeAnt and it is only $19 a month, so there really is no excuse not to have it. For the peace of mind, its worth it.