Posted on: 06th Dec, 2009 01:01 pm
I was wondering if a cosigner is still liable for paying off a loan in case of loss of job/death if there is insurance on the loan? More specifically, the loan in question would be an FHA loan on a condominium or single family home. Would the insurance pay it off first or would they go to the cosigner first?
The co-signer is just as liable as the primary borrower. I do not recommend co-signing for ANYONE unless you are prepared to take on the debt yourself.
by insurance, i assume you mean LIFE insurance? if there's a policy covering the balance, then that insurance would pay off the loan in the event of a death, and you would be off the hook. if that's not what you're discussing, please elaborate.
i have to agree with eric; you'd better fully understand what it is to be a cosigner long before you decide to sign your name.
i have to agree with eric; you'd better fully understand what it is to be a cosigner long before you decide to sign your name.
A co-signer is as much responsible for the mortgage payments as the primary borrower is. If the main borrower dies or defaults on the loan due to job loss and other reasons, the lender will come after the co-signer. Mortgage insurance does not protect the borrower. It protects the lender against any loss on the mortgage. Moreover, the mortgage insurance covers only a part of the mortgage. Thus, as a co-signer you will be responsible for the remaining part of the mortgage.
are we confusing private mortgage insurance with mortgage life insurance? these are two distinctly different types of insurance.
private mortgage insurance insures a lender against a default by a borrower. there is no benefit to a borrower, save the fact that borrowers wouldn't qualify for a loan unless the insurance was available to the lender.
mortgage life insurance is a benefit to a borrower - more so to the borrower's family, i guess - in that in the event of the death of the insured borrower, the loan would be paid in full. there is no additional benefit, however, so mortgage life insurance pales in comparison with a regular life insurance policy, which gives heirs all sorts of flexibility in how to deal with the death and the proceeds from the policy.
with private mortgage insurance, a death has no real impact, unless there is a default on the mortgage. borrowers and subsequent owners, such as heirs, are not going to reap any benefit from the existence of private mortgage insurance in the event of the death of a borrower.
private mortgage insurance insures a lender against a default by a borrower. there is no benefit to a borrower, save the fact that borrowers wouldn't qualify for a loan unless the insurance was available to the lender.
mortgage life insurance is a benefit to a borrower - more so to the borrower's family, i guess - in that in the event of the death of the insured borrower, the loan would be paid in full. there is no additional benefit, however, so mortgage life insurance pales in comparison with a regular life insurance policy, which gives heirs all sorts of flexibility in how to deal with the death and the proceeds from the policy.
with private mortgage insurance, a death has no real impact, unless there is a default on the mortgage. borrowers and subsequent owners, such as heirs, are not going to reap any benefit from the existence of private mortgage insurance in the event of the death of a borrower.