One Absolutely Essential Decision: Mortgage Protection Insurance

by Cindy Brick

mortgage protection insuranceI met her while looking for a chicken coop. “Sandy” was selling everything…because she had to. A month before, her husband was helping a friend when he suddenly keeled over. Dead at 59.

He loved his wife of 25 years, and his two kids. (She definitely loved him.) They’d had a busy, happy life and lived in the same house for nearly all of that time. She wanted to keep staying there.

But his was the only name on the mortgage papers. No will, either.

Even though she and the kids would obviously inherit, eventually, the bank would not let them stay. Unless, that is, she wanted to buy the place from them. At the price they set.

She had no income. (Husband was the primary wage earner, and she was a stay-at-home mom.) She couldn’t qualify for a mortgage – even if she’d been willing to buy her own place back. She had 45 days to move. 

I drove home, thanking God all the way that my husband, the Brick, insisted that we put both our names on large purchases. If something awful happened, neither of us would be forced to give up our home or vehicles.

This scenario is more common than you think. One of the Brick’s friends from work went through a nasty divorce and was forced to leave her home, with kids in tow, for this same reason. She couldn’t afford to ‘buy’ the home she’d been living in for decades, even though her ex didn’t want to keep it. (He ended up staying in the house, so they wouldn’t lose it to the bank. Yet.)

The moral of the story: if you’re co-paying for a home – or vehicle – or boat – or trailer – put both your names on the title. If you divorce or separate, the equity you’ve been contributing to will be divided. If your partner dies, you’ll be able to keep paying on it, without worrying that the bank will snatch it away.

Mortgage Protection Insurance

Make it even better with mortgage protection insurance. This is not a regular part of homeowner’s insurance; it automatically pays off the debt, if one person dies. (Some even cover payments if the owner loses their job, or are disabled.) It’s generally reasonably-priced. And it’s a godsend. We know this firsthand. When the Brick’s father died quite suddenly from a massive heart attack, the Missouri property he and Mom had been planning to move to was completely paid off. It gave her incredible peace of mind, at a time she desperately needed it.

Oh that “Sandy” could have had that, too.

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Cindy Brick

Cindy Brick is a personal property appraiser, judge and national teacher who loves to write about frugality and other personal finance topics. She has written six books and hundreds of articles, but often focuses on quilting, her teaching specialty. She lives in Colorado with her husband, two golden labs and a flock of very suspicious chickens. Find out more at Brickworks, http://www.cindybrick.com, or visit her personal blog: http://www.cindybrick.blogspot.com

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{ 4 comments… read them below or add one }

Crystal July 14, 2012 at 9:38 am

How sad for Sandy, and especially when she’s already suffered a devastating loss. I know a few couples that have put just one name on a loan due to the bad credit of the other spouse (can make a big difference on interest rates). We also have a vehicle title that should have been done differently but had to go with who was there to sign at the time of purchase.

And speaking of vehicle titles – just a reminder to always use “or” instead of “and” so that each party has full rights to do whatever without the signature of the other.
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Edward Antrobus July 14, 2012 at 12:45 pm

Ack! This is my fear. I’m working on creating a will this weekend, because my name isn’t on the house, the lot rent, the mortgage, anything but the bank account and the utilities. Crystal has it there. Getting the mortgage just wasn’t going to happen with my name on it.

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maria@moneyprinciple July 14, 2012 at 2:19 pm

Yes, there comes a time when we have to ensure that the ones coming after us will be fine should something happen to us. We own the house jointly, have life insurance and have made certain that our respective pensions will go to the other. Anything can lurk around the corner.
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Cindy Brick July 15, 2012 at 12:52 am

The only good reason I can think of NOT to have your name on the mortgage is the credit issue…that you don’t have a good credit score. Honestly, I suspect this may have contributed to the issue in “Sandy’s” case.

But this is the risk you take. It’s a frightening one. I honestly had not even thought about it until I met this lady, but I’ve had the issue confirmed from several different sources.
Sad.

Thanks, all of you, for writing.
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