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YOUR MONEY
Smart consumer tips and strategies from Eyewitness News Online



Job Loss Mortgage Insurance

Owning a home is the American dream. But, with years of hefty payments, there's always the fear, "what if I get laid off?" Mortgage unemployment insurance promises to protect your home.

Here's how it works: If you lose your job, the contract would kick in and pay for your mortgage. However, the coverage varies from policy to policy:

>>All or part of your mortgage may be paid
>>There may be a waiting period or limit on total number of months covered.
>>Generally, the job loss must be out of no fault of your own.

While the product has been around for years, it's entering the mainstream now that more companies are offering it. At Bank of America, for example, 15% of its customers with new mortgages are opting for the product.

The cost of the insurance varies from company to company, and depends on the price of your loan. Let's take one example. Let's say you have a $100,000 mortgage for 30 years at 7% interest. John Pataky from Bank of America says it (mortgage unemployment insurance) would be about $49 a month: "So for seven hundred and forty nine dollars instead of seven hundred they have that peace of mind."

So, who's a candidate for this type of insurance? Financial planner, Todd Battaglia says it's best for a homeowner without six months of expenses in a rainy day fund or a household with one wage earner. "I would suggest that probably the best use of it would be for a two to three year time frame until you get that cushion of savings built up," says Battaglia.

Smart Idea!Bright Idea...

Where can you find this type of protection? Ask your bank, credit union, mortgage lender, or real estate agent. Also, make sure you compare plans.

Paying Less for Your Home Loan

Even if you've landed a low mortgage rate, you will likely still end up paying huge amounts of interest over the life of your loan. In fact, if you stay in your home long enough to pay off a typical 30-year mortgage, your interest payments will probably end up being substantially more than the actual cost of your home.

But experts say you can reduce the interest you pay. Peter Miller, publisher of "Realty Times" has the following advice:

Check This!Before You Buy, Refinance

Get it right the first time. "The best way to save interest is to get the right mortgage in the first place," Miller says. How? Check your credit rating, shop around for the best rate and choose a company that won't charge a penalty for paying off the mortgage early. (Read on for specifics about your credit rating.)

Consider a shorter term. You may want to see if you can afford a 15-year mortgage rather than a 30-year mortgage. The monthly payments would be more, but your long-term interest bill would be much less.

Check This!After You Buy

Pay more each month. "Even payments as small as $50 or $100 a month can significantly reduce the term of your loan," Miller says. "As your income goes up, you simply add to your monthly payment, or you can send in a complete extra payment when you have the money," Miller says.

Examine your statements. Experts say that you should send any overpayments in a separate check, and that you should always double-check your mortgage statements. "It's very important to look at the number and make sure that the extra money that you paid in was, in fact, credited to reducing the principal of your debt," Miller says.

Caution: Some people shouldn't prepay their mortgages. Don't start prepaying if you haven't:

Warning! Already contributed to your tax deferred investment plans
Warning! Paid off higher interest credit cards
Warning! Set aside some emergency savings.

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