Do you know the difference between a Named Perils Policy versus an Open Perils Policy? Know the difference before you choose your homeowners policy. It can mean covering your jewelry and valuables and not having coverage.Read More
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One of the questions we get from a lot of our new home buyers in Buffalo is regarding mortgages and whether or not the mortgage payments they make cover home insurance or taxes. The answer is yes, most mortgage payments do include insurance and taxes but there are a few details that new homeowners should know.
What new home buyers need to know about their mortgage, insurance and taxes
In addition to principal (the amount borrowed to buy a home that needs to be paid back) and interest (what the lender charges for lending you the money) your monthly mortgage payment may also include an escrow payment (property taxes and homeowners insurance).
What are escrow payments?
If you have set up an escrow account for your mortgage, each month you’ll make a payment into your escrow account to cover your property taxes and homeowners insurance. Your lender will deposit this amount into your escrow account and will pay for both your home insurance and property taxes on your behalf when they are due.
Regularly scheduled monthly escrow payments are good option for many homeowners because they help eliminate the surprise of large annual or semi-annual payments due for property tax or insurance.
How do homeowners know how much to pay into their escrow account?
Your lender will estimate your yearly home insurance premium and property taxes and that is what you will pay into your escrow account. Remember that this number is just an estimate, so at the end of the year you may get a refund or have to pay extra if your lender underestimated the rates.
Here are three things to note about taxes and insurance premiums on your home:
Taxes and insurance premiums change over time, so your yearly escrow payment should be adjusted to reflect this.
Always check your year-end escrow statement to make sure all bills are paid and there are no mistakes. If you have any questions, contact your lender immediately because at the end-of-the-day these payments are your responsibility.
You may cancel your escrow payments to your lender once you have built up at least 20% equity in your home and if you are current on your payments. If you decide to go this route, remember that you’ll be responsible for paying your taxes and insurance in full and on time.
Being a new homeowner is exciting but there are a lot of details to nail down and there is a lot of information to digest. Luckily, you can always talk to your lender or insurance provider if you have questions.
Are you a new homeowner in buffalo? What questions do you have about home insurance?
Believe it or not but your house is more than just a structure with your family living in it. When your house is tied to a home loan, it essentially becomes a financial instrument. And when you think of it this way, it becomes clear why your home loan will often get resold to another lender, during the life the loan.
If you're a new homeowner or a homebuyer, it can be a surprising and scary thing to learn that your home loan has been sold to another lender. What does this mean? Do you still have the same terms? Will your monthly payment change? Will it affect my credit? And how does this affect my homeowners insurance?
Luckily, there is nothing to worry about.
If your home loan is sold to another lender, it has nothing to do with you or the quality of your loan. Typically the details will remain unchanged, including the original terms and conditions, interest rate, loan duration and payment schedule. So is there anything you need to check on if your home loan is sold to another lender?
The answer is “yes.”
You home loan and your homeowners insurance
When you purchase a home loan, your lender will require you to purchase homeowners insurance. If you have a mortgage escrow account, your insurance payments will be lumped with your loan payments.
If your loan is sold to another lender, call your new servicer to ensure they have all your correct information on file. It’s important to make sure your beneficiary is listed correctly and to double-check whether or not your insurance is sufficient with your new lender.
Some mortgage companies offer to escrow life or disability insurance to pay off your mortgage in case of a death or make payments in case of a disability. Your old servicer should inform you what effect the transfer of servicing will have on this insurance coverage. If they don’t, ask them so you are clearly understand whether the changes that have been made still provide you with sufficient insurance coverage, or if you need to alter your policies in any way.
Call your service provider or insurance agent
There is no reason to be alarmed if your home loan is transferred from one lender or another--typically these transfers happen without a hitch in the process. However, always check in with your service provider or insurance agent if you have any questions. (844-837-2869)
When you’re renting a cabin, a beach house, or any type of vacation home, regardless of the amount of time, chances are, you probably won’t need additional insurance if you already have renters or homeowners insurance. And this usually applies even if the vacation home is outside of the United States.
It’s always wise to ask the rental homeowner for the type of insurance they have, and to ensure that they are covered, should they be liable for any damages.
Homeowners and renters insurance protects more than just your home.
In most standard homeowners insurance policies, you will have personal property coverage and liability coverage.
Personal property coverage covers your belongings regardless if your personal belongings are in your house, outside of your house, or if you're away on vacation.
But be sure to check your policy in detail because the coverage amount may be less for belongings that are damaged outside of your home. If you feel that you’ll need to increase the coverage limits, you can always make the adjustment to your policy before you head to vacation.
It’s also important to note that belongings such as water crafts, boats, and other sporting equipment may not be covered under the definition of “personal belongings.” You may be required to purchase additional insurance or an extension (aka rider).
On top of personal property coverage you'd also covered for liability under your standard homeowners insurance. If you or anyone in your household causes accidental damage to the vacation property -or to anyone’s personal property for that matter, and regardless of where you are, you would be covered up to a certain limit for that damage. This coverage may go towards medical bills or legal fees if you are found liable.
Before you take an extended vacation in a dreamy cottage, be sure you double check the terms of your policy. And if you’re too busy to rummage through the technicalities of insurance terms, then definitely reach out to your insurance agent (844-837-2869), who will be more than glad to break the terms down for you.