Old home, Why do i need insurance included with mortgage?
by admin ~ December 13th, 2008 . Filed under: Insurance .
Chris H asked:
I have a 30 year mortgage with Washington Mutual and currently have home insurance and soon required to have flood insurance. This is a 50k load on a 90year old home purchased from family. The property is the most value and the home is not. The insurance payments and interest are to much to afford. Is there any way to refinance or get a loan just on the property and not include any kind or insurance? any ideas to lower the payments? i don’t think their is PMI still.
Ambrose Bagnall
I have a 30 year mortgage with Washington Mutual and currently have home insurance and soon required to have flood insurance. This is a 50k load on a 90year old home purchased from family. The property is the most value and the home is not. The insurance payments and interest are to much to afford. Is there any way to refinance or get a loan just on the property and not include any kind or insurance? any ideas to lower the payments? i don’t think their is PMI still.
Ambrose Bagnall
December 16th, 2008 at 7:57 pm
If your property requires flood insurance, the land value may not be as high as you think. If the home is of little value, contact the bank about having it demolished. If they allow it, this will cost you money, unless you can convince your local fire department to set it on fire for practice. If there is any building on the property, you will have to insure it, as the bank owns part of it, and wants to protect its investment.
December 17th, 2008 at 6:31 am
Sorry, but if you are in a flood zone and have a mortgage, the bank can insist on flood insurance. Since all banks use the same flood zone reports and maps, it doesn’t matter if you go to another bank, the same condition will apply. If you have PMI, you would have to bring your equity up to 20% to eliminate that. Since you are having trouble paying your insurance and interest, you probably can’t afford to make a payment toward principal. If you think your property value has risen since you financed, and that you have equity in the property that is equal or better than 20%, you can ask the bank to have a new appraisal done ( that YOU pay for) and see if you can have PMI removed that way. Why don’t you know for sure whether or not PMI is on it? Ask them and be certain. You don’t state what your interest rate is. You can shop around and see if you can get a better rate, but don’t forget you will have additional costs- a new closing, new title insurance costs, etc. to have it refinanced- so it has to be worth at least 1.5%-2.0% difference in the new rate to justify such expenses. Refinancing can cost you several thousand dollars in fees and expenses.
December 19th, 2008 at 9:37 pm
Flood insurance is required by law if you have a building on the property.
Go to this page and read about “purchase requirements”
Is the flood insurance a new requirement for this property? if so, find out why.
It is possible that:
1. The federal flood maps in your area have been changed and you have been added to a flood zone
2. The flood maps have been changed and it appears to someone at the mortagage company that you are in a flood zone, but you are not really in one.
3. The maps haven’t changed and you were in one the whole time and nobody ever noticed.
4. The maps haven’t changed and you aren’t in a flood zone, but someone at the mortgage company incorrectly THINKS you are in a flood zone.
Step one: You need to find out which one of these things is true.
Contact the mortgage company and find out what is going on. Ask them why the change and what information they have used to determine that you are in a flood zone.
IMP: YOU DO NOT HAVE TO USE THE INSURANCE THE MORTGAGE COMPANY IS PUSHING ON YOU, BUT you still MAY need to have flood insurance of some kind. You can buy insurance from a local agent which will be MUCH cheaper. Call local agents and get some quotes. You may need to have coverage for a short time until you get this straightened out. Ask if you get a refund if it turns out you are not in a flood zone.
You need to look online and see if you think your house is really in a flood zone. If it is in a flood zone on the map but you have reason to believe that your elevation puts you above the flood zone (for example, you are at the top of a really big hill and the neighbors are all much lower) then you can get a letter from the fed. gov’t which states you are above the flood zone. This is a complicated process and costs money since you have to have the property surveyed.
Even if you are not at the top of a really high hill, you can still be above flood level when some of your neighbors are not—-and it is possible for part of your property to be in the flood zone, but your HOUSE is above the flood level.
I have a slope in my backyard that doesn’t seem like a big deal, but it makes a BIG difference as far as the flood map. The house behind me and a couple of feet of my back yard are in the flood zone but my house is well above the flood level. I had to get a “letter of map amendment” to prove my house was above the flood level so I didn’t need the insurance.
Start by looking here:=-1
Good luck.
December 19th, 2008 at 11:43 pm
No. As long as you have a mortgage, the lender will require homeowner’s insurance. If the house is within a 100-year floodplain, the lender is required (by federal law) to require you to carry flood insurance.
No lender will give you a mortgage on the “land only” but not the improvements.
December 21st, 2008 at 2:36 pm
if your house burns down or gets destroyed by flood, the current replacement cost will be a lot more than 50,000. I own a 100+ yr old rental house that cost me 20,000 the replacement insurance coverage is over 150,000 - because that’s what it costs to tear down and rebuild a new house nowadays. If you don;t get proper coverage - enough to totally rebuild it new - your property will be worthless if something happens like a fire. And if you have a mortgage on the property - the mortgage company will require you to have insurance so in cas eof a fire - THEY get their mortgage loan paid. how can the “property” be worth more than the house - especially if you’re in a flood plain that require flood insurance. Land is usually worth a very small percentage of the entire property.
December 24th, 2008 at 4:37 am
If the whole thing is too much then perhaps you’re living above your means. Put the house on the market and downsize or consider renting.
December 26th, 2008 at 6:32 pm
As long as you have 20% equity in the property or LESS, the financing company is going to want to escrow the taxes and insurance. It doesn’t MATTER, to them, if all the value is in the land - they’re going to escrow, until you’ve got 20% or more equity in the whole shebang.
The age of the house is irrelevant, as far as the escrowing.
No one is going to lend you money for the property, unless you carry insurance on it. That’s one of the “deals” with the loan.
But you CAN start shopping around for a better deal. And if you don’t care about having any actual coverage on the house, why don’t you get a couple quotes with $10,000 deductibles on the policy.
December 28th, 2008 at 12:14 am
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December 29th, 2008 at 9:05 am
Home insurance covers lots of different things. I’m not sure about Washington regulations, so I suggest you contact a nearby home insurance agent. They should be able to assist you.
December 30th, 2008 at 2:34 am
homeinsurance.awardspace.us - you can try this company. I personally have their home insurance. As I know it is a cheapest one in my area for mortgage.