A Little Too Much Home Protection
(MONEY Magazine) – Q If I die, I'd like my family not to worry about paying the mortgage. I get a lot of mail hawking mortgage insurance. Should I buy it?
If you've bought a house or refinanced recently, you've likely seen a sales pitch for mortgage life insurance. The come-on: This policy will pay off the balance of your mortgage if you die. Sounds good, but the truth is that mortgage life insurance is almost always a bad deal. For one, it's expensive. A healthy 30-year-old male can expect to pay about $400 a year for $250,000 worth of mortgage life insurance. Premiums may increase every five years or so as you age. And you'll likely pay higher rates even sooner if you buy a new house or refinance within a year or two because you'll have to line up a fresh policy.
If you're worried about leaving your family with a big home debt, says New York City financial planner Gary Schatsky of Objectiveadvice.com, a generous term life insurance policy is a far better bet. "You can get substantially more coverage for less than you would pay for mortgage life insurance," he says. The same healthy 30-year-old male could pay as little as $115 a year for a $250,000 term life policy with premiums fixed for 10 years, according to AccuQuote.com; for $255 a year, he could increase that coverage to $1 million. Besides, notes Barbara Steinmetz, a financial planner in Burlingame, Calif., it doesn't always make sense to pay off the mortgage if the primary breadwinner passes away. "You want your family to have the flexibility to use the money for other purposes," she says. The one exception: Because mortgage life insurance generally doesn't require a physical examination, you may want to consider it if your health would cause you to pay even higher rates for a term life policy, or make you unable to qualify for one at all. But even then, be careful to make sure you won't bump up against payout restrictions on pre-existing conditions.
HOME LOAN RATES
HEADING HIGHER With the Fed's latest rate hike, interest rates on all home loan products are expected to increase.
1-year adj. 6.67%[*] 5/1 adj. 6.18%[*] 15-year fixed 6.14%[*] 30-year fixed 6.40%[**] 30-year fixed jumbo 6.58%[*] Home-equity loan 7.78%[*] Home-equity credit line 8.08%[*] Current average
[*] Up from previous month [**] Down from previous month
NOTES: As of March 17.  $417,000 or less.  More than $417,000. SOURCE: HSH Associates.
DEALS: 3/1 Hybrid Adjustable-Rate Mortgages
The banks below offer some of the best loan rates and terms. Use them as a benchmark for your own shopping. Visit hsh.com for more deals.
NOTES: As of March 17. Rates and terms subject to change.  Annual interest-rate cap: 2%; lifetime cap: 6%.  Annual interest-rate cap: 2%; lifetime cap: 5%. SOURCE: HSH Associates.
LARGEST REAL ESTATE FUNDS
NOTES: As of March 17. Largest funds by assets.  Annualized.  Closed to new investors. SOURCE: Morningstar.