Real Estate Information Archive

Blog

Displaying blog entries 1-2 of 2

Home Insurance

Monday, December 9, 2013
by Tom Stachler,ABR,CDPE - Group One Realty Team

It is fine to buy a lottery ticket now and then. It is fine to take a chance on a football pool. One risk you don't want to take, however, is on your Home insurance. Most claims are going to be for broken windows and other minor issues. The real value of home insurance is against catastrophic loss. It loses that value if the coverage does not keep pace with the replacement cost of the home.

How can homeowners be assured that they are paying for sufficient coverage? Doesn't the policy increase automatically? The convenience of insurance payments going into escrow to be paid by the lending institution may render the level of coverage invisible to the average home owner. It is even possible for owners of newly constructed homes to be underinsured if the cost of construction has recently risen. Remember that lending institutions insist on coverage to balance their loss in case of fire, not yours. The wise homeowner makes it their business to keep track of their coverage, no matter who submits the premium.

There is a solution to the possible deficit in coverage. The type of home insurance you want to arrange is called Guaranteed Replacement Cost. This insures that in the event your home is completely destroyed, the cost of reconstruction will be covered in its entirety.

Have you considered the value of the contents of your home? A complete inventory of your possessions is an important component of the insurance process. The cost of electronics could be very significant if you have to replace everything you have amassed over time all at once. Furniture, artwork, musical instruments and jewelry all total more than you might imagine. Before you negotiate home insurance, make sure everything you own has been cataloged and documented. Take photos and file them electronically as well as the receipts to prove ownership and value in case of loss.

To make sure your home insurance coverage grows with the value of your belongings, perform an annual review. Discuss the results with your insurance agent. They will help you navigate your insurance options and even help you find lower rates when possible. Don't forget bundling discounts that save money.

Add Comment

Mortgage Insurance Cancellation: Myths and Realities

Monday, July 11, 2011
by Tom Stachler,ABR,CDPE - Group One Realty Team

When it comes to private mortgage insurance (PMI), there are several myths that exist that make buyers reluctant to consider a conventional loan with PMI as an option when purchasing a Home. One of the more common misconceptions is that cancelling PMI is a difficult—not to mention time-consuming—process.

The irony is that the majority of buyers don’t harbor those same beliefs or reservations about an FHA insured loan when, in reality, FHA coverage may be less easily cancelled, or take longer to cancel, than PMI.

HPA Makes Cancellation Clearer
When it went into effect as a new federal law, the Homeowners Protection Act (HPA) of 1998—which applies to both FHA and PMI insured loans—required lenders and servicers to provide disclosures regarding MI for residential loans obtained on or after July 29, 1999. Prior to this, consumers were responsible for requesting PMI cancellation if they met two factors: one, their loan balance was paid down to 80 percent of the property; and two, they had a good payment history.

While many lenders obliged consumer requests to drop PMI coverage, consumers had sole responsibility for keeping track of their loan balance.

The HPA established three different times when a lender or servicer must notify consumers of their rights.

At loan closing, lenders must disclose:
• The right to request PMI cancellation and the date on which the request can be made
• The requirement that PMI be automatically terminated and the date on which this will occur
• Any exemptions to the right to cancellation or automatic termination
• A written initial amortization schedule for fixed-rate loans only

Each year, loan servicers must send borrowers a written statement that discloses:
• The right to cancel or terminate PMI
• An address and telephone number to contact the loan servicer for determining when PMI may be cancelled

When MI coverage is cancelled or terminated, lenders must send a notification to borrowers stating:
• PMI has been terminated, and the borrower no longer has PMI coverage
• No further PMI premiums are due

Termination of Coverage
Under the terms of the HPA, mortgage lenders or servicers must automatically cancel borrower-paid MI coverage when the mortgage has amortized to 78 percent of the original property value, with all unearned premiums returned to the borrower within 45 days of the cancellation or termination date. This provision also requires that the borrower be current on mortgage payments required by the terms of the loan, and if the loan is delinquent on the date of automatic termination, a lender must terminate the coverage as soon as the loan becomes current.

Cancellation of Coverage
Also under the HPA, a homeowner has the right to request PMI cancellation when the mortgage balance reaches 80 percent of the original property value. All payments must be current, meaning a homeowner must not be 30 days late on a mortgage payment within one year of their request, or 60 days late within two years.

However, a borrower can only initiate a cancellation request for FHA based on their prepayment of the loan, and even then, it can only be requested beginning five years after the loan origination date.

With PMI, homeowners can request cancellation based on prepayment of the loan, as well as an appraisal. Despite falling property values, it’s possible for homeowners to gain enough equity in their home to request cancellation in less than five years based on a home appraisal.


Add Comment

Displaying blog entries 1-2 of 2

Syndication

Categories

Archives