I have a property that I am considering a C/D. I still have a mort. on the property. When I sell on a C/D the new buyer has to get home insurance right? Well, if I still have my home insurance on the property do I have to keep my home insurance so as to not to tip off my bank and invoke the Due on Sale clause? Any thoughts? This house is currently being rented so the home insurance premiums are higher than normal.
One would think that your insurance on a rental would be cheaper not more expensive, you should check this out. The buyer should buy insurance, you should just make sure you are the first party to be paid in case of a fire or something else accures.
One more thing that I reccomend is that when you set-up or structure your CFD that you make it a valueable Note that’s attractive to Note Buyers. You never know when you might need liquid cash. Herbster
I do plan on making the note FNMA conforming just in case. If I understand right that should make the note more appealing to more note buyers…
Back to the insurance. Am I not required to carry insurance on the house because of the existing mortgage between me and the bank with the bank as insured? What if I cancel this insurance will the bank be tipped off? I would imagine that the bank wants this protection on their loan…
Stepping a little out of my realm here but I don’t think FNMA buys CFD Notes. A Note Buyer(investor) would look at the LTV, downpayment, home buyers credit, interest rate, seasoning etc.
Your statement on the insurance-the bank is insured confuses me some what. But yes you don’t want to tip them off to call the DOSC.
Maybe Dave T. can help clear this up some. Herbster
Packer, Almost forgot. There is a very good free ebook in the Investor Information area to the left under free ebooks and audios. You want the one called Owner Will Carry and you’ll learn a lot about CFD Notes in it.Herbster
Why are your home insurance premiums higher than normal? In my experience, a rental dwelling policy is less expensive than a homeowners policy because the rental dwelling policy does not cover contents.
If you have renters in the property and still have your homeowners insurance, you need to convert it to a rental dwelling policy. Chances are that your insurance company will deny a claim under your homeowners policy because you are no longer using the property in the manner for which it was insured.
One option around this might include adding your buyer to your homeowner’s policy as an additional “named” insured and have the buyer pay the premiums. Ask your insurance agent if this would be possible for your circumstances. Make sure you ask about additional NAMED insured and not just additional insured. There is a big difference.
If you sell on CFD and let your homeowners insurance policy lapse, then your lender will do a forced placement. They will buy an insurance policy for you and charge your escrow account a very expensive premium.