The recent economic circumstance has thrown us some interesting curve balls. Shortages, shutdowns, layoffs, and hospital overcrowding have us all wondering “what’s next?”
Your personal financial situation is no different. A phenomenon for buyers and sellers of real estate to focus on is historically low interest rates on home loans. These low rates are the catalyst for a continuous wave of homeowners taking advantage of refinancing.
Refinancing, the name for replacing your mortgage with a new one with a lower interest rate, can save homeowners thousands of dollars over the life of a loan. First time refinancers need to understand the role of insurance when refinancing your home.
When you approach a new lender to refinance, they will generally require proof that you currently have homeowners insurance. They will also require documentation that shows they will be listed as the new mortgagee on the policy going forward. Some lenders wait until the refinance is complete before confirming your insurance names them. Many times, the new lender will have the refinance conditional to their name being added to your insurance policy before processing forward.
The original lender usually stays named on your home insurance policy until the refinancing transaction is complete. In some cases, they remain on the policy until the new lender takes ownership, depending on the terms of your new loan. These contingencies are generally spelled out in loan contracts. You are not obligated to keep the same insurance carrier when your refinancing in carried out, but most assuredly you will be obligated to have insurance at closing.
The process may also involve closing an escrow account with your old loan that you were paying into for both taxes and insurance. This account is refunded to you when your original loan is paid. Rolling that account in to your new loan is a good option.
Do you need new Title Insurance When Refinancing?
You probably bought title insurance when you borrowed for home initially. Will you need new title insurance? Probably not for you, but your new lender is not covered under your first policy. They may require that you provide title insurance for your refinance. Your new lender will want protection for unforeseen liens made against you since you first bought the home.
Refinancing insurance can be simple and complicated at the same time.
If you are looking for more details about insurance coverage when refinancing your home, or how you can ensure your home insurance policy is current and you are protected, contact our office: