Is your dream of becoming a homeowner finally coming true this year? Congratulations! One of your next steps will likely be shopping for mortgage insurance.
This product is typically offered by your financial institution when you sign your mortgage. Its primary purpose is to cover your mortgage payments in the event of death, disability, or critical illness.
While mortgage insurance is mandatory if your down payment is less than 20% of the purchase price, you are not required to obtain it from your bank. You also have the option to work with a financial advisor.
So, financial institution or financial advisor for your mortgage insurance? Let’s weigh the pros and cons.
Mortgage insurance with a financial institution: Easy, but expensive
Are you familiar with the key features of mortgage insurance provided by a financial institution? Here are the main points to note:
- The insurance contract belongs to the institution, not the individual borrower.
- In the event of the borrower’s death, the benefit is paid directly to the institution.
- The premium for the mortgage insurance is determined based on the overall health of the institution’s client pool.
- If you decide to terminate the contract, no cancellation fees will be charged
- This type of insurance concludes once your mortgage has been fully repaid.
Choosing to take out mortgage insurance with the same institution that holds your mortgage can be quite convenient. Many homeowners prefer this option mainly because it simplifies administrative procedures. The insurance can be signed at the same time as the mortgage and even included in the monthly mortgage payments, making financial management easier.
Simplicity is not its only strength—speed is also a key advantage. Typically, answering just a few questions is enough to complete your application.
What are the drawbacks? First, there’s the cost. Because the premiums aren’t based on your individual profile, those offered by banks are typically higher than those provided by independent advisors. Additionally, even as your mortgage balance decreases, your premiums often stay the same, while the coverage amount diminishes.
The second major disadvantage is flexibility:
- You can only insure the balance of your mortgage.
- You can only insure your spouse or guarantor.
- If you switch institutions to get a better interest rate, you’ll need to take out new mortgage insurance.
So, is the grass greener with a financial advisor? Let’s take a look.
Mortgage Insurance with a Financial Advisor: Personalized, but Demanding
Mortgage insurance with a financial advisor: Personalized, but demanding
When you obtain mortgage insurance through a private financial advisor, it differs from financial institutions in several ways:
- The contract is owned by you.
- In the event of your death, the benefit is paid to your designated beneficiaries.
- The premium is determined by your health and can either stay constant throughout the contract or adjust according to your needs.
- Cancellation fees may apply if you decide to terminate the contract.
- This type of insurance remains valid even after your mortgage is fully paid off.
Mortgage insurance obtained through a financial advisor is typically less expensive. Premiums are determined by factors such as your age and health. If you are in good health, this can be very beneficial.
Flexibility is another significant benefit of working with an independent professional. They can tailor products to fit your specific profile and even address other debts. Additionally, owning your insurance contract provides an advantage; if you switch financial institutions for your mortgage, your coverage remains intact.
However, before you can enjoy these personalized services, you need to choose an advisor. This involves reviewing all your options with them, which can make the decision-making process longer and more complex.
It’s important to remember that a financial advisor is, in essence, a salesperson. This may lead to more persistent sales tactics. Advisors could also earn higher commissions on certain products, which may influence their recommendations. Lastly, some homeowners might feel less secure, as private advisors operate under looser regulations compared to banks.
So, choosing between a financial institution and a private advisor for mortgage insurance ultimately depends on your specific needs. It may not be the clear-cut answer you were hoping for, but it’s important to know that each option has its own pros and cons, which may or may not suit you depending on your stage of life.
To make an informed decision, don’t hesitate to contact the D’Astous Cloutier Team. With them, you’ll have the peace of mind of navigating these crucial choices with transparency, care, and professionalism.
