Can a second mortgagee insure the property to protect his interests
UPDATED: Aug 20, 2018
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I own the second mortgage on a property. Can i get insurance to protect my interest in the property.
Asked August 20, 2018
Generally, when taking out a mortgage loan, the lender is added to the policy as a mortgagee. When a second mortgage loan is taken out, the secondary lender must be added to your loan paperwork. So, while the first lender has rights to your property, the second lender must be paid also in case of damage.
Lenders require that you have insurance equal to the lower amount of the replacement cost value of your property. Let's say you have your first mortgage of $250,000 and your replacement cost value is $300,000, then your first mortgage lender requires that you get insurance coverage of $250,000. So, if you get a second mortgage for $25,000, then the second mortgage lender requires you to increase coverage to $275,000.
In some cases, you may be able to extend your existing homeowners insurance policy to your second mortgage. You may also need to get a separate insurance policy to protect the contents of your property for the second mortgage.
You could also consider a personal umbrella policy which adds extra liability coverage over another insurance policy. This protection would extend to your second mortgage and protect your property. Speak with your agent to find out more about the personal umbrella policy in Massachusetts, or your agent may have other information about insurance protections for your second mortgage in your area.
Lastly, you could check the National Association of Insurance Commissioners for more information about insuring your second property. There may be some special conditions of your loan with the second mortgage than with your first mortgage.
Answered August 23, 2018 by ailee44