Made $7K By Mistake...Anyone Heard of This? - Posted by Carmen

Posted by FJW on April 27, 1999 at 12:02:59:

If you want life insurance to cover your loan, see your insurance agent and add a rider onto your own life insurance policy. Go for simple term insurance or a decreasing term policy that will closely follow the loan term. It will cost much less even if it isn’t coming directly out of your pocket. Credit Life is one of the biggest consumer rip offs out there.


Made $7K By Mistake…Anyone Heard of This? - Posted by Carmen

Posted by Carmen on April 26, 1999 at 21:25:34:

We just had our first closing today - kinda anticlimactic, since the house already has a tenant, nothing to “DO” with our “new house!”

But, we did make $7K by mistake, so it’s not too boring!

We were borrowing $42K on a home valued at $68K. The bank (it was a bank loan, 75% LTV max - nothing too creative, sorry) assured us several times that our loan was for $42K. We get to the closing, and Lo and Behold - the loan is for $50K because they had to add “Credit and Life” insurance polices to our loan - at the cost of $7K for both! We were flabbergasted, to say the least - until we found out that we could cancel these two policies in a couple of weeks, and get a check mailed to us from the insurance company! We closed anyway ($50K was still a good deal - no work to do in this house). Now, we think we’ll ask for insurance on purpose - this does NOT get computed into the 75% max LTV limit (go figure). We can get extra cash out!

We were just trying to borrow the minimum ($42K) to maximime monthly cashflow (rent is $750) - but we won’t fight it. That means we’ll get $7K out of this, plus $291 a month this year ($750-$459 PI) - we prepaid taxes and insurance for the year - and about $191 (including TI) for the next year or so until we sell for about $70K. And the best part was - we rolled all of our costs into the loan, and got a check back at closing for $95! NO MONEY OUT OF OUR POCKET!!!

Wow, this stuff really works. And we thought we couldn’t do it in South Florida…

PS - Our next closing is May 7…

Carmen, please read. - Posted by karp

Posted by karp on April 27, 1999 at 12:47:35:

Please fax the HUD-1 Settlement statement from your closing to my office at 801-394-5733.

I would like to take a look at that and perhaps provide insight into what has happened.



Re: Made $7K By Mistake…Anyone Heard of This? - Posted by Irwin

Posted by Irwin on April 26, 1999 at 22:42:11:

Are you saying that they charged you $7,000. up front for credit life insurance? And you can cancel anytime and get the cash refund? I’ve never heard of that. Usually credit life is added to the monthly payment, and it’s a few bucks a month. Are you sure about what happened?

Re: Made $7K By Mistake…Anyone Heard of This? - Posted by phil fernandez

Posted by phil fernandez on April 27, 1999 at 06:19:16:


There’s something wrong here. The bank is charging you $7,000 for credit life insurance up front? As Irwin said, they usually charge a small monthly fee for this.

Check with your closing attorney to see what actually took place. I’ve never heard of the situation that you describe.

Re: Made $7K By Mistake…Anyone Heard of This? - Posted by Carmen

Posted by Carmen on April 27, 1999 at 10:28:33:

I am convinced that this was a big mistake on the part of the bank. They (the bank) assured me that the mortgage amount would be $42,000, and that the insurance, as you said, would be on a monthly basis. This is not what happened (we DID get charged for the entire $7K at closing, rather than what works out to be about $58/month for 120 months). I didn’t have an attorney at closing, but I did read the insurance papers, where it says that 1) you do not NEED to have the insurance to qualify for the loan and 2) you are allowed to cancel the policy within 15 days with no penalty.

We made the decision to close anyways, simply because it would have still been a good deal at that price, and because the closing agent also explained to us that it was not only possible but required by law that the insurance refund us the cost if we cancel. If we made a mistake, at least we’ve learned from it. But I think it was the bank that made the mistake - they are not the most able of people; we had to keep on top of them every minute, and even though we talked to them minutes before the closing, they were still insisting that we would not be charged for the insurance up front!

I’ll let everyone know how this fiasco turns out.