November 18th, 2011, 11:37 AM #1
I am refinancing because interst rates are attractive
But I am in the final few iterations of paperwork and last night I get a call saying my flood insurance is not adequate.
The mortgage is on a house with perhaps ~60% equity.
What business is it to the mortgage company if your insurred at 100% of property value?
I don't mind but it does seem like the maximum insurance the lender should be able to demand is enough to cover the debt.
November 18th, 2011, 11:48 AM #2
Well, without insurance and if you have a catastrophic loss, their collateral is down the toilet.
A year ago, I self-refinanced my house. I had about $60K left at 5.75%. I also have a home equity line of credit, currently at 2.74%. Looking at the economy I predicted that rates would not rise in the next few years. Therefore, I wrote a home equity check and paid off the primary mortgage, saving 3% and not incurring any fees.
Now, I just pay a monthly payment to the home equity line and the additional interest savings pays more equity.Conservatives: "If the facts disagree with our opinion, ignore the facts -- or at least misrepresent them."
November 18th, 2011, 12:12 PM #3
I guess I am thinking of the insurance wrong.
I figured that in the case of a flood and me under insurred that the lender would get their money and I would be left looking for a rental.
but I guess that all depends on how the insurance is paid out.
November 18th, 2011, 12:18 PM #4
If you have a mortgage, you can't deposit the insurance company check without the bank's co-sign, since it's made out to you and the bank.
I recently had hurricane damage and that's how it worked for me.Conservatives: "If the facts disagree with our opinion, ignore the facts -- or at least misrepresent them."
November 18th, 2011, 12:32 PM #5
You and the bank are partners, and they are senior. Therefor they put requirement in the loan such as an "impound account" where taxes and insurance are paid, and liens and property damage don't wipe out their interest in the property.
Flood insurance covers replacement of the home. Insurance is not "fractional", so you can't say you only want to insure say 15% of your property. It's all or nothing.
Originally Posted by MTA
Seconds are usually tied to some federal index, then a mark up is added. A first is a different market, since it's not necessarily against equity, so there is more risk.
Dumb bank = your gain!
Last edited by Chuckiechan; November 18th, 2011 at 12:39 PM."The world burns while Obama Tweets."
November 18th, 2011, 12:49 PM #6
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