Insurance And Your Mortgage: Tips For New Homeowners
Posted on: 3 March 2017
New homeowners often have a lot of things thrown at them at once. Everything from homeowner's insurance to property taxes can be foreign to them -- and this can be additionally confusing because some mortgage companies will take the reins for them. When it comes to your mortgage and your insurance, here are the things that are most important for you to know.
Your Homeowner's Insurance Is Often Rolled Into Your Mortgage Payments
For most homeowner's, they'll never need to think about their insurance. Why? Because the bank will automatically include it in their escrow account; it will be included in their monthly mortgage payments. However, this can also be a downfall, as it means that a homeowner may not really be aware of what their coverage is. The bank will cover the property from their perspective, which focuses primarily on the value of replacing the property. You, as the homeowner, may have different priorities, including the property that you have placed inside of your home.
Not Maintaining Homeowner's Insurance Could Cause Issues With Your Loan
But what if your homeowner's insurance isn't included with your mortgage? If you had a conventional 20% down mortgage -- or another low risk mortgage product -- they may not have required you to have homeowner's insurance taken into escrow. But that doesn't mean you aren't required to have homeowner's insurance. In fact, a lapse in insurance coverage could easily cause you to become in default of your contract with the bank. Most banks will require you to not only maintain homeowner's insurance but also to show evidence of having it.
You Can Usually Negotiate Better Homeowner's Insurance Rates
Homeowner's insurance rates can usually be negotiated at a better rate as an individual. This is because you can roll it into auto insurance policies -- and it's especially true if you're starting with a good credit rating. Because a mortgage company usually handles homeowner's insurance, it's easy for a first-time buyer to assume they are stuck with that policy. But most can request that the policy be modified by calling their loan officer.
Whether your homeowner's insurance is through your mortgage or through you, it's very important that you maintain consistent coverage. If you fail to maintain coverage for any reason, you could very well find yourself in a tremendous amount of debt. Once you've purchased your home, you may want to go over your homeowner's insurance requirements and paperwork with your mortgage company.
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