How does homeowner's insurance work? Is it part of your monthly mortgage or is it something you pay separately?
2007-11-20 00:53:06 · 13 answers · asked by ♥CarolinaMommy♥ 3 in Business & Finance ➔ Renting & Real Estate
Lenders require homeowners insurance as a condition of the loan. If you are borrowing more than 80% of the value of the home (or the purchase price, whichever is lower in most cases) then they will want to escrow the taxes and insurance.
Escrow is a separate bank account set up for a specific reason. In this case, the lender takes all the taxes and insurance payments from the people who've borrowed money from them, and store them in this non-interest bearing account until the time they're due. Then the lender makes the payment. Non-interest bearing means they aren't making any money on this arrangement.
If you have at least 20% equity in the property, then you usually have the option of paying the taxes and insurance yourself, or having it escrowed. Escrowing these payments means you have one less thing to worry about.
However, taxes and insurance costs can change during the year, and there can come a time when you are behind on the escrow. The lender will send you a letter telling you the total payment is increasing to accommodate the additional costs. This can be a problem because you may need to come up with a big chunk of change and then have higher monthly payments. The lender or title company could also have made a mistake and undercharged for taxes and insurance, but you're the one who gets to pay the price to fix it.
Impound is the term they use in California. They use the term escrow to refer to the time between the signing of the contract and the signing of the final documents to transfer ownership.
2007-11-20 03:51:37 · answer #1 · answered by Debdeb 7 · 0⤊ 0⤋
It is a separate charge, over and on top of your loan payment.
It is usually paid once per year, but if you're smart, you'll put an appropriate amount aside every month. Same idea with property taxes, which (depending upon your state) are paid anywhere from quarterly to once per year.
Assuming you have a loan, the lender will be only too happy to set up an impound account for you, where you pay a monthly pro-rate into the account, and the lender disburses the money when it's due. This way, they know your property taxes and insurance bills were paid, and since failure to pay either can cost the lender some major money, this makes them very happy. In most states, lenders are permitted to charge an additional fee for loans that do not have impound accounts.
On a strict dollar accounting basis, it's usually better not to have an impound account.
2007-11-20 02:16:03 · answer #2 · answered by Searchlight Crusade 5 · 0⤊ 0⤋
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RE Thinking about buying a house... Homeowners insurance?
How does homeowner's insurance work? Is it part of your monthly mortgage or is it something you pay separately?
2014-09-22 06:52:42 · answer #3 · answered by Anonymous · 0⤊ 0⤋
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RE :Thinking about buying a house... Homeowners insurance?
How does homeowner's insurance work? Is it part of your monthly mortgage or is it something you pay separately?
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2016-08-23 23:18:38 · answer #4 · answered by ? 6 · 0⤊ 0⤋
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RE Thinking about buying a house... Homeowners insurance?
How does homeowner's insurance work? Is it part of your monthly mortgage or is it something you pay separately?
2014-10-03 09:04:47 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Something you pay separately thru your Insurance Agent. You can usually get HOI thru the company that insures your car and be eligible for a multi line discount. I have Home owners insurance, life insurance and car insurance all thru the same Agent, therefore i get a discount on my car insurance rate. My Home Owners insurance covers interior and content. Since I own a townhome the HOA covers the outside to rebuild the building to it's former condition, my HOI pays to repair the rest.
You can get mortgage insurance that you pay with your mortgage usually about $10.00 / month that protects you if you can no longer live in your residence they will pay to relocate you somewhere until you can return, however it won't cover you like Home Owners insurance. If you are purchasing a house you will need to have that already set up before closing, all mortgage companies will require proof of home owners insurance before closing.
2007-11-20 01:06:54 · answer #6 · answered by Weimaraner Mom 7 · 0⤊ 0⤋
It can be either way. We pay for insurance and taxes in with our mortgage. It's much easier that way. We have it all set up at our bank where we deposit money into a special account, and all three things are taken out of it by the mortgage company. We never have to worry that they're being paid on time. It sure makes life a little easier!
2007-11-20 00:58:17 · answer #7 · answered by N L 6 · 3⤊ 0⤋
unless you have 20% cash down, it likely will be included as an escrow item, which means you pay an estimated amount every month. Property taxes will also be escrowed.
the escrow account will be 'analyzed' once a year to determine if you are paying enough -- you'll get a statement and notice of the new (higher) monthly amount.
2007-11-20 00:59:22 · answer #8 · answered by Spock (rhp) 7 · 1⤊ 0⤋
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2015-01-13 11:23:09 · answer #9 · answered by ? 1 · 0⤊ 0⤋
Homeowners insurance is typically something you pay each year.
2007-11-20 00:56:57 · answer #10 · answered by Anonymous · 0⤊ 1⤋