When financing a home, lenders require borrowers to find a homeowners’ insurance provider and policy. Associated fees will frequently be included in the mortgage payment. Many lenders make these payments to the provider to ensure that the policy does not lapse. The money collects in an escrow account until the annual premiums are due.

Occasionally, owners may desire to either change their policy or change providers. Despite payments often not being directly paid by the policyholder, these adjustments are possible.  Here are the issues to consider and steps to follow:

Making the Necessary Changes

While owners are free to change providers and make changes to a current policy, they must maintain coverage at the minimum required. Desired changes can be achieved by contacting the existing insurance provider or selecting new provider entirely. If a new provider is selected, be sure to cancel the original policy to avoid the possibility of double payments.

Contact the Lender

Since lenders will likely still make the insurance payments, promptly inform them of any changes to the policy or provider.  A new policy with a new company will require a premium payment prior to the policy becoming effective. So determine if there are escrowed monies sufficient to cover this payment or if payment will need to be made out-of-pocket. When changing policy providers, it’s safe to anticipate receipt of a refund from any unused portion of your old premium within a few weeks. Typically, this will be provided in the form of a check from the prior insurance company and presenting this amount to your lender may be needed to ensure no shortage in escrowed funds.

Be Aware of Your New Mortgage Payments

When an escrow account is reviewed, mortgage payments may change based upon an increase or decrease in your insurance premiums. So be mindful of any changes when making subsequent monthly payments to the lender. Failure to be attentive to these potential changes could result in an escrow shortage.

While changing homeowners’ insurance policies to save money or obtain better coverage can be desirable and a wise choice, keep in mind that because of potential for lender involvement in making the payments, this process is somewhat more complicated as a result. For additional information regarding items impacting monthly mortgage payments, feel free to contact me today for a consultation. I will be happy to answer any questions you may have, help you to find your dream home or determine the value of your existing property

Allyson Hoffman, ABR, ACRE, CDPE, CRS, e-PRO, GRI, SFR, SRES
RE
/MAX Villager
Serving Chicago's North Shore, North and Northwest Suburbs
847-310-5300
[email protected]

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Allyson Hoffman is your ultimate real estate resource for Chicago's North Shore, North and Northwest Suburbs and surrounding areas. Visit my website for detailed information regarding today’s real estate markets.   

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