A LITTLE TOO MUCH HOME PROTECTION.

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Author: Max, Sarah

THE MARKET

Q If I die, I'd like my family not to worry about paying the mortgage. I get a lot of mail hawking mortgage insurance. Should I buy it?

If you've bought a house or refinanced recently, you've likely seen a sales pitch for mortgage life insurance. The come-on: This policy will pay off the balance of your mortgage if you die. Sounds good, but the truth is that mortgage life insurance is almost always a bad deal. For one, it's expensive. A healthy 30-year-old male can expect to pay about $400 a year for $250,000 worth of mortgage life insurance. Premiums may increase every five years or so as you age. And you'll likely pay higher rates even sooner if you buy a new house or refinance within a year or two because you'll have to line up a fresh policy.

If you're worried about leaving your family with a big home debt, says New York City financial planner Gary Schatsky of Objectiveadvice.com, a generous term life insurance policy is a far better bet. "You can get substantially more coverage for less than you would pay for mortgage life insurance," he says. The same healthy 30-year-old male could pay as little as $115 a year for a $250,000 term life policy with premiums fixed for 10 years, according to AccuQuote.com; for $255 a year, he could increase that coverage to $1 million. Besides, notes Barbara Steinmetz, a financial planner in Burlingame, Calif., it doesn't always make sense to pay off the mortgage if the primary breadwinner passes away. "You want your family to have the flexibility to use the money for other purposes," she says. The one exception: Because mortgage life insurance generally doesn't require a physical examination, you may want to consider it if your health would cause you to pay even higher rates for a term life policy, or make you unable to qualify for one at all. But even then, be careful to make sure you won't bump up against payout restrictions on pre-existing conditions.

HEADING HIGHER With the Fed's latest rate hike, interest rates on all home loan products are expected to increase.

1-year adj.                 6.67%[*]

5/1 adj.                    6.18%[*]

15-year fixed               6.14%[*]

30-year fixed[1]            6.40%[**]

30-year fixed jumbo[2]      6.58%[*]

Home-equity loan            7.78%[*]

Home-equity credit line     8.08%[*] Current average

[*] Up from previous month

[**] Down from previous month

[1] $417,000 or less.

[2] More than $417,000.

The banks below offer some of the best loan rates and terms. Use them as a benchmark for your own shopping. Visit hsh.com for more deals.

Burnet Home Loans                    Chase Manhattan Mortgage

Edina, Minn.; 952-844-6300           San Francisco; 415-315-7900
Rate: 5.5%[1]; $450 application fee  Rate: 5.54%[2]; no application fee
Maximum loan: $417,000               Maximum loan: $650,000

[1] Annual interest-rate cap: 2%; lifetime cap: 6%.

[2] Annual interest-rate cap: 2%; lifetime cap: 5%.

                                              TOTAL RETURN
                                             ONE     THREE    TELEPHONE
                                             YEAR   YEARS[1]    (800)

Vanguard REIT Index (VGSIX)                  37.8%    32.5%    851-4999

Fidelity Real Estate Investment (FRESX)      37.5     33.6     343-3548

Third Avenue Real Estate Value[2] (TAREX)    22.6     31.3     443-1021

Cohen & Steers Realty Shares (CSRSX)         40.9     37.8     437-9912

Cohen & Steers Realty Income A (CSEIX)       27.8     28.1     437-9912

Wilshire REIT Index                          42.2     32.9

[1] Annualized.

[2] Closed to new investors.