READ THIS if your home has burned!
I read a Facebook message from a client at 5 AM on 10/9/17 that they may lose their home and that was the first I heard of this disaster, I was in Chicago on vacation. Later that night I got a direct message from that same client asking if she & her husband could call me and I said absolutely anytime. She “face-timed” me on Facebook instead of calling so I got to see their faces and what fire does to someone first hand. The first question they had was “We don’t have a house, do we still have to make our mortgage payment?” and I answered that yes they do need to make their mortgage payment and that insurance would likely cover rent expenses until they were able to re-build. In the 2 weeks since that phone call, I have learned a lot.
I want to offer some advice and help along the lines of mortgage and insurance. This is not a complete offering and there are nuances and gray areas and there is definitely not one piece of advice that is exactly right for everyone…
Most mortgage companies offer to let their clients skip from 2-6 payments in the wake of a disaster like this which at first sounds really good. I suspected they would just tack these payments on to the end of the mortgage term but I learned that many companies just allow you to put off the payments and that is all. For example if your mortgage payment is $2,000/mo. they will let you skip November and December payments and get back on track in January. The shocker is that come January they expect you to make up the skipped payments and pay $6,000 at once or you can go on a payment plan but now you are $4,000 behind. You need to discuss the options with your mortgage company and you need to READ THE FINE PRINT on any agreement they send you so you do not get yourself in a pickle. I am happy to look at any agreements that you get from your mortgage company and offer guidance.
As a Mortgage Advisor, I often tell people during a refinance that they may need more insurance coverage on their homes. Many times they get mad at me that their premium will go up. Insurance is looked at as a necessary evil and something you need to obtain a mortgage. Now we see the importance of proper coverage. Your home may be worth $600,000 but the cost to rebuild your home may only be $300,000 because of the value of the land and location. Your insurance agent will insure your home for $300,000 in this case.
Often, insurance will have 150% replacement cost (actual coverage would be $450,000) or they will have a clause that allows for extra costs to accommodate new building codes et cetera. The bottom line is that your insurance was in place and had these limits set BEFORE the event and can’t be changed now. Insurance should be reviewed annually. Typically Insurance companies have a 12 month limit on how long they will pay rent and deal with re-building. In this case with entire neighborhoods destroyed, the toxic removal will take some time and the Sonoma County Board of Supervisors are reaching out to the governor and the Insurance Commissioner to work on exceptions to this rule and possibly working on legislation to extend time frames. Not all policies are the same so – READ YOUR INSURANCE POLICY!
I have put together a website that I will keep updated with information that I gather and you can stop by there anytime. hbruhner.lenderama.com/fire
Need to know more? Please send me your real estate and mortgage related questions. I am happy to answer you and it may become the topic of a future article.
