Mortgage Appraisal Free
Why are my mortgage and insurance companies insisting I have replacement cost in my mortgage insurance?
They say I need $160K insurance for a $76K loan. Appraisal on the house is about 85K. I have been bouncing back and forth on the phone and no one can give me a straight answer as to WHY they require replacement cost. Please help me understand why the mort co instsis I get a new free house if there is a fire.
Because, most homeowners policies are based on cost to rebuild the house. Because of that, if that’s the kind of policy you have, and there is a partial loss, and you aren’t insured to the full repalcement, then you don’t get the full payment for the loss.
Sounds confusing. But let me explain with real numbers. We probably both agree, that most losses are partial losses. We also probably both agree, that you couldn’t rebuild your house, if it burnt to the ground, for $76K, even if it’s only worth, market value, $85K. Lastly, if you think about it, we probably both agree, that if your kitchen is 20% of the square footage of your house, and your house is worth $85K, and you have a kitchen fire, your insurance company can’t just pay you for the kitchen part of the house (20% of $85K, or $17K) and walk away. You’re going to want them to pay to FIX the kitchen.
OK, so the standard policy has a “coinsurance” clause in it. For math’s sake, let’s say that it is 100% (although some will be 90%). What that means is, if you underinsure the house, they only pay the portion of the claim that you insured. So, your house is worth $80K. Your mortgage is $76K. The cost to rebuild is $160K. You decide you want to insure the house for the $80K, what it would bring if you sold it.
You have a kitchen fire. There’s water damage to the living room and bathroom downstairs, smoke damage throughout the house, and you need a brand new kitchen. Estimate of the damages, $60,000. Under your policy limit of $80K, right? Right. BUT. You only insured the house for half the value. They pay half the claim, $30,000. Minus your deductible.
Now, you have to either cough up $25,000 to fix the kitchen, or you have a house you can’t use the kitchen in . . . and likely one that won’t sell for half of your payoff. Most likely, you’d abandon it, and leave the bank with a house that they can only sell at a major loss, leaving them holding the bag on the loan balance.
And that’s why lenders want you to insure for full replacement value.
Free Appraisal on New Loans – Alliance Financial Resources
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The above mentioned are the basic requirements in order to qualify for a home loan. Secondly, I was interested to know how big a home loan I could get considering Mortgage Appraisal Free. As soon as I knew how much, I could start searching for a house.
Mortgage Appraisal Free
Who can do this loan?
Attn: Mortgage Lenders, Loan Underwriters, Loan Originators, Mortgage Brokers, Mortgage Bankers.
Who can do this loan??????
90% LTV
No PMI
Intrest Only
No Prepay Penalties
Assets verified but not income
Purchase Price 375,000
Appraisal 410,000
One Employer Fulltime for 7+ Years
At Current Residence for 7+ Years
Current home owned Free and Clear
New Purchase is primary residence single family detached New Construction
800 FICO
first 2 trade lines 24+months
3rd trade line 18 months
Serious replies please.
-Location New Jersey USA
-Current property currently not listed but will be soon and proceeds will be used to pay off major portion of mortgage
-New Purchase is planned long term residence
-Looking for best solution to transiton to new property
-Income does not meet debt rations when Institutions view both properties as comodities not assets.
Hi Mig the Realtor,
I actually have two different options for you that are right in line with your request.
One option is done right at a Wachovia branch and is on “paper” held through the bank (through me) and one through the mortgage arm of the bank (through my Mortgage Consultant).
Give me a call at the branch and we’ll get it done.
813-681-2866
Thanks,
Frank