Posted on: 22nd Nov, 2010 11:35 am
The underwriter just approved the refi with the condition that I increase my ho ins coverage to the loan balance amount. The current coverage covers the replacement cost of the house. I did not have to do this with my last refi which was about a year ago. My ins agent says this is not a good thing to do because they would never pay more than the cost to rebuild the house. He says any coverage above the replacement cost is a wasted premium. The value of the land more than covers the diff between the current cover and the balance...it seems like a very strange request.
Is this a common request? Does it make sense to you? Any ideas on how to get the lender to remove the condition?
Is this a common request? Does it make sense to you? Any ideas on how to get the lender to remove the condition?
Hi k!
Welcome to forums!
I haven't heard of such requests from the lenders. What I can suggest you is that you should contact other local lenders and check out if anyone of them can help you with a refinance that to at a lower coverage for your insurance.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
I haven't heard of such requests from the lenders. What I can suggest you is that you should contact other local lenders and check out if anyone of them can help you with a refinance that to at a lower coverage for your insurance.
Feel free to ask if you've further queries.
Sussane
I've already paid for the appraisal and gone through underwriting so I'd rather not change lenders at this point. The extra coverage came out to $9/mo so I went ahead and did it. I still don't understand why -- It seems like the underwriter needs a lesson in how hazard insurance works.
There is nothing unusual about this underwriting request. It is standard.
What is unusual is that your Loan Officer failed to give you the explanation.
From a 10 yr mortgage consultant.
What is unusual is that your Loan Officer failed to give you the explanation.
From a 10 yr mortgage consultant.
The request is not standard.
In NJ it is against state regulations to require home insurance greater than the replacement costs.
In some cases a purchase is $400,000 and the mortgage is 386,000. Of the $400,000 purchase the land value is over $100,000. Land can not burn down, therefore, no requirement to insure over replacement cost because the insurance compnay would never pay that amount anyway.
In lieu of actually raising the dwelling coverage, often having replacement cost coverage as an option in the policy keeps the underwriter/lender happy
Maybe regulations vary in other states, but, it is not logical to require insurance coverage that will nevr be paid.
In NJ it is against state regulations to require home insurance greater than the replacement costs.
In some cases a purchase is $400,000 and the mortgage is 386,000. Of the $400,000 purchase the land value is over $100,000. Land can not burn down, therefore, no requirement to insure over replacement cost because the insurance compnay would never pay that amount anyway.
In lieu of actually raising the dwelling coverage, often having replacement cost coverage as an option in the policy keeps the underwriter/lender happy
Maybe regulations vary in other states, but, it is not logical to require insurance coverage that will nevr be paid.
