mortgage life insurance

Advice You Need To Know When Shopping For New Mortgage

Recently, there have been a lot of talks about reverse mortgage in the media and even in the social Medias.  The new survey conducted shows that almost 55% of the people in Canada who have attained the age of 55 and above are worried that they will run out of their saving before they finish their first ten years of retirement.

Due to this reasons most individual opt for this program so that they can supplement their savings and income. However this people they find if difficult to choose a reverse mortgage that will not stress them because they often see this program as a burden. Some alternatives need to be considered. This article will outline all the things you need to know about reverse mortgage in Canada.

What is the meaning of reverse mortgage?

It is a plan or program that allows all homeowners who have attained the minimum age of 55 years to borrow a loan up to 50% of the value of the home they own, unlike other loan plans. With this program, you don?t have to proof your income to anyone or anywhere.  If you go for this loan, you can use it doing anything, and you?re not required to pay this money or interest until the time you decide to sell it.

Merits of program

If you look at it carefully, you will see that there are a lot of advantages than disadvantages

You are not forced to make any regular payments

It is easy to qualify since you don’t have to provide you income proof.

The loan is tax-free hence it doesn?t interfere with your pension or Guaranteed Income Supplement.

You?re the one to decide how to receive your cash

You remain the owner of the property.

Demerits of this plan

All of this merits above looks great but don?t forget: if something seems too good to be true, it should be, or it is. The following are disadvantages of taking this type of a loan:

In Canada, only one offers the service (Canadian Home Income Plan) by the HomeEquity bank.

If you borrow more with more equity the interest accumulates very quickly.

The interests are a very high if you compare it with other mortgage rates.

There are two main ways to get out of this program that is selling your property or death.

If you die amount of money, you borrowed plus the interest that has accumulated has to be paid for a limited period.

How does one qualify for this in Canada?

In Canada, it is very easy to be eligible for reverse loan since they look at five things only (age, current interest rates, and the value of your home and location of your property)

 

 

 

Life Insurance Fundamentals

Term Insurance Explained

Life insurance comes in two types – temporary and permanent. Most people have some type of temporary insurance either as a term insurance policy, mortgage insurance, or group insurance policy (likely through work or an association plan like an automobile club). Some also have permanent insurance either in the form of whole life, insurance, universal life insurance, or Term to 100 Insurance. ce.

The purpose of this insurance is usually for a short term or temporary need (to age 55 or 65 while the family is growing up and you are saving for retirement. It is to provide cash in the event of your death so those who depend on you will have the money to:

Settle your debts – mortgages, loans (business & personal), remove guarantees, make up for the income you provided to the family – Remember the impact of inflation when doing this calculation. At 3% inflation, a need to supplement income by $25,000 will grow to $50,000 in 24 years.

Provide for children’s education, marriage etc.

Complete the funding for your spouses retirement plan – very important and why many need some term insurance to age 65 – this can also be a consideration for those looking for permanent insurance as well.

For businesses, it can be to fund a buy/sell agreement or to provide insurance on a key employee to provide cash to find a new person, absorb the financial shock of the loss and have additional funds to pass on to the family.

You can see the temporary nature of this insurance. It has a specific relatively short term purpose which will no longer apply by at least age 65. This insurance can be very inexpensive for the amount you are purchasing ($1 million can cost between $60 and $100 per month depending on age, sex and smoking habits) because most people will never collect it. It is purchased to cover you life when you are relatively young and the need is frequently gone by age 55 or age 65 for some of those concerned about saving for retirement.

It generally comes in 5, 10, 15, and 20 year terms. This means that the premiums are guaranteed for that period of time and they will automatically renew at a higher rate for the next term period. For example, a 10 year term policy has guaranteed rates for the first ten years and then you can renew it for another ten years without a medical at a set rate contained in the policy. Do not renew it if your health is good as the renewal rates can be 25% to 100% more than the premiums if you shop around for a new policy. The assumption is that you only renew if you are too sick to get a new policy.

Money Saving Tip 1: Over half the people renew term insurance and pay these high premiums – get a new policy – with preferred term rates it might be less than you were paying.

At one time, insurance premiums were divided into smokers and non smokers. However, the companies now have statistics that enable them to determine those who are least likely to die based on lifestyle, family history and blood pressure and some measurements they get from blood samples, such as cholersterol levels. About half the people will qualify for a preferred rate. At the time of this writing, a 35 year old should be able to purchase $500,000 for about $35 per month at regular rates but preferred rates would be in the $25 per month range. Some companies also offer a preferred smoker rate for those who would qualify for a preferred rate but they smoke.

Finally, there is the issue of convertible. You will see most policies are renewable which means you can renew them for another term of say 10 years and convertible. Convertible means you have the right to convert all or part of the policy to a Permanent Policy at any time during the term without a medical. You just pay whatever the rates are at the time of conversion. If you policy was issued on a preferred basis some allow you to convert on a preferred basis if they have preferred universal life insurance rates. This is an inexpensive option that is usually built into the policy cost and worth the extra price. A few companies will offer policies without this conversion option for a small savings.

Money Saving Tip 2: Ask for preferred rates. Refer to the sample questionnaire to see if you would qualify at Preferred Insurance Levels.

Money Saving Tip 3: There are significant differences between some companies in the percentage of people who will qualify for preferred rates ranging from under 50% to over 75%. Ask me about this.

Money Saving Tip 4: If you are a smoker of cigars or enjoy a pipe, some companies will consider you to be a non smoker. Make sure you get this rate.

It is not expensive to move the financial risks to your family of your death to an insurance company and it is the responsible thing to do.

Remember, the impact of inflation when doing this calculation. At 3% inflation, a need to supplement income by $25,000 will grow to $50,000 in 24 years.