MPI vs paying down principal

3 Replies

I'm being offered the "opportunity" to purchase Mortgage Protection Insurance for $85 per month on a $165,000 loan in the event I go to heaven so I leave a PAID OFF house to my posterity. The insurance payout would decrease each year as the principal decreases. What would be the diff between MPI and simply paying down the principal using the $85 each month I would have used to buy the MPI? TIA!

Originally posted by @Champ Leong :

@Joe Villeneuve My home. But it would be applicable to either. 

 The answer would be different for either.

Own Home:  All money paid that is directed to your own home, comes out of your pocket and is a cost to you.  This is because all the funds comes from you.  If it were me, I'd pay down the principle wince this reduces the cost by reducing the interest.  Paying The other option just adds to the cost.

Rental Property:  Only the money that comes out of your pocket is a cost to you.  The rest, as long as you have positive cash flow, comes from the tenant's rent.  This should mean the only cost to you is the down payment.  Either option increases your cost for no good reason, so I wouldn't do either.

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