04-14-2012 09:25 AM
I've seen video of homes completely destroyed by fire, tornado, earthquake, etc.
What happens to the mortgage, am I still liable to the bank for the remaining balance?
Is the equity in the home completely gone?
Will home insurance pay me the equity & also pay off the rest of the mortgage?
04-15-2012 10:13 AM
Welcome to the ZipRealty community and thank you for posting in the forums!
I will contact one of the local agents to see if they are able to answer this question for you.
Client Care Specialist
04-15-2012 04:31 PM
A quick two word answer-"it depends". There are as many answers to this question as there are variations on your insurance coverage. This question is really more for your insurance agent than your Realtor. Generally speaking most mortgages contain a clause specifying what type of coverage is required, and dictate the terms to the insurance company. Needless to say, besides your name on the policy your lender will also be listed as "Name of Insured".
This is why you cannot close a mortgage without suitable insurance. But back to your policy. It generally states that the mortgage either gets suspended and the paid money claim escrowed while the home is rebuilt. This is not always the case. Some insurance companies pay a lump sum to settle. Everyone needs to review their homeowners policy for the answer. Many exclude certain types of disasters. So heads up if you live near a Nuclear generating facility. Or an earthquake fault.Or within the flood plain of a river or lake. Depending on the history of your particular neighborhood, you may be surprised to find some type of disasters that you consider common, like flooding from the local lake, are excluded.
04-16-2012 07:58 AM
The homeowner's insurance if you are covered for earthquake, flood, tornado will only pay off the cost of building another home up to the value of the policy. If you have no insurance coverage for the disaster you can apply for a low interest grant to rebuild but the insurance company will not cover the equity. It is like having car insurance, if you only carry liability and you total your car there is no payment to replace the car yet you still have to finish paying it off.
it is always wise to talk to several insurance companies for the best plan available and make sure it is covered for the cost of rebuilding the home not just market value at the time of the loss.