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Roberta Said:

If you home is destroyed does insurance company pay off the mortgage and give you the rest to rebuild??

We Answered:

Not exactly.

First of all, there are a variety of possible "valuations" to a policy. The MOST the insurance company will pay (with a few exceptions), is the policy limit. So if you've way underinsured your house, you're NOT going to get the mortgage paid off, and money in your pocket. If you have a "market value" policy, you're only going to get "sales value", not cost to rebuild.

Secondly, the VAST VAST VAST majority of fire claims are PARTIAL losses. The whole building rarely burns down, unless you've got an arson issue - and then you've got OTHER problems. If your fire isn't a total loss, THEN you have to worry about "coinsurance" on most policies - where if you underinsured the cost to rebuild the house, you share the loss with the insurance company.

If you choose to not rebuild, you do NOT get replacement value - you only get replacement if you rebuild, AND you have replacement valuation on your policy.

You do NOT get "upgrades" required by new building code laws, unless you have purchased the "building ordinance & law" endorsement on your policy.

If you have any substantial type of claim, like over $5,000, what's most likely to happen is the check is issued, payable to both you and the mortgage company. They won't release it until/unless the mortgage is paid. But they WILL release it to a third party, like a general contractor who is going to rebuild for you.

And in MOST urban and suburban areas, there is a "holdback" required of the local municipality, of demolition costs, so you don't take the money and abandon the property, leaving the city to repo it for unpaid property taxes and demolish the rest of the structure.

Craig Said:

Pay Mortgage Insurance up front or factor into loan?

We Answered:

Mortgage insurance is tax deductible on a limited basis. It's currently being extended as being tax deductible through 2010, assuming you bought the property in 2007 or later. But, this is only 100% deductible with a combined annual income of $100K. It then phases out as you make more money, until it's no longer deductible if you make $110K.

You would be able to deduct it as part of the principal if you financed it with the mortgage. But, you would pay more in interest charges on it over the lifetime of the loan, as well as having a higher loan balance to pay off when you sold the property.

I would recommend rolling it in with the principal. You will have a marginally higher payment, but you'll be able to write some of that off. And, the extra $5K or so in principal will probably be negligible when you go to sell. Plus it will be in inflated dollars.

Ryan Said:

Should i get Insurance that pays off my mortgage if i die?

We Answered:

1. Never buy from some random company that just sends you junk mail. Any legit company with a good reputation will follow up a letter with a phone call from a real person and then arrange a time to meet in person. In my opinon the rest are nothing more than policy pushers that just want to sell you something and don't care about you.

1. Never buy any kind of mortgage insurance that only pays off the outstanding balance of the mortgage/debt (known as creditor insurance). What you want to buy is term life insurance from an independent broker. There are many benefits to term life over creditor insurance, but the biggest one is post claim underwritting. Rather than typing out a HUGE long post explaining the differences here are 2 links to an independent news special on how shady creditor insurance is:

http://www.cbc.ca/marketplace/2008/02/06…
http://www.cbc.ca/marketplace/2007/02/cr…

And a link to a comparison of all the differences between term insurance and creditor insurance:

http://asset-aid.com/bank_vs.html

If you would like further comparisons feel free to google search "Term insurance vs. Creditor insurance (or mortgage insurance)" And you will find hundreds of sites that comapre them and likely not a single one that will promote creditor insurance over term, unless it is a completely biased bank trying to push their own product.

As for getting term life insurance for a mortgage, if you want to make sure your family keeps their home, it would be a good idea. You can contact a local insurance broker in your area and they will be able to shop around for the best product and price for your needs.

Kenneth Said:

If a house burns down, does the insurance pay off the mortgage, & then make you turn the land over to them?

We Answered:

They pay you the money directly, you then pay off the mortgage, rebuild, or buy something else. It is all up to you. They do not gain possession of your land.

Gordon Said:

When you pay off your mortgage, does that affect your homeowner's insurance?

We Answered:

Well, yes and no. If you have a mortgage the bank will demand that you have enough coverage
to cove the mortgage balance it case something Happens. But if your mortgage is paid-off you could
lower your insurance and hence your primium payment will lower as well. But, remember you wanna
have enough coverage that if something happens to your paid off house, you can replace it!