Saturday, May 24, 2014

Mortgage Retention Insurance: What you should know about this

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 Written by: CRB Benedict Baluyut, REA, REB

Have you wondered what does Mortgage Retention Insurance (MRI) is for when you are paying to your respective lending institutions like Home Mutual Development Fund (PAG-IBIG) or at commercial banks or private lending companies? Sometimes, the licensed real estate agent professionals might have missed out to discuss to you about these about this type of insurance included in your other charges or they might have discussed this to you but you have forgotten about it or still figuring out the charges on your computations.

How does Mortgage Retention Insurance works?

Mortgage Retention Insurance comes in many names such as Mortgage Life Insurance (MRI) or Mortgage Life Assurance or Mortgage Protection Options etc just to name a few by insurance providers here and abroad. MRI is defined as decreasing-term life insurance policy taken by a mortgagor to repay the balance on a mortgage if the person dies before its full repayment. In simple terms, it is designed to protect a repayment mortgage as it will take out the previous balance or outstanding debt for payment once the borrower is deceased and the main beneficiary of this policy is the mortgage company or the lending institutions. MRIs are usually tied in Home Loan application with Philippine banks or mortgage companies. 

What are the differences of Mortgage Retention Insurances between Life Insurances?

Both MRI and Life Insurances for all, as they are give an added protection for you and your family in order to give them a security in life if something happens like death or permanent disability / terminal illness. In hindsight, MRIs can cover the biggest expense left by a deceased breadwinner - the house. The cost of acquiring a home has been steadily rising in the past decade now. Life insurance on the other hand, will cover mostly the daily expenses from education, living cost and others during the demise of the policy holder and time period of recovery of the surviving family.

There are advantages and disadvantages on an MRI as well, one is that they are expensive and than the average term life insurances. MRIs premiums are usually incorporated into your home loans in lump payment (one-time payment paid annually) it still means you are paying finance charges. It is true that life insurance could beat the MRIs for example if your life insurance coverage is P 2,000,000.00 against P 1,000,000 on the house you bought. MRIs drastically change on a yearly basis. Better to and update from time to time if you already have an existing MRI.  However, if you have a P 5,000,000 house and lot property and you are only covered at P 2,000,000.00 you will definitely need an MRI. In both ways they are both beneficial at the same time with added cost to fork out but at a lesser expense as both financial products have different purposes.

I only have vacant residential lot, do I need to get covered with MRI

Yes, even if you only own a vacant lot it still necessary to get one because you are still paying the lending institution the borrowed amount of funds in your acquisition of a property.

Is Mortgage Retention Insurance necessary for now?

Most of the young borrowers, they would generally shrugged the idea of passing away. It has a negative notion to most Filipinos but in general, an MRI will cushion the financial impact of death on your surviving family members. The outstanding balance of loan payments will be automatically given to mortgage or lending institution and the home will be distributed to their heirs of the deceased policy holder. There are some lending institutions that make the MRI optional but the majority of commercial banks require their borrowers to have this type of insurance in case of sudden demise.

CRB Benedict Baluyut, is a certified real estate professional (PRC Real Estate Broker & PRC Real Estate Appraiser). He writes from time to time with Registered Financial Planner Column at Business Mirror and MoneySense, a Personal Finance Magazine in the Philippines. Catch him on Facebook page Pinoymoneyvantage | Follow me on Twitter | Add on Google+ or visit his official blog at

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