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I am about to purchase my first home, and the company which I am trying to get my mortgage with is charging me for 15 months of hazard insurance up front……is this normal?

I understand that I have to have Hazard Insurance, but I just don’t see that I have to have so much of it before I even move in. I would then be charged Hazard insurance for every month I am in the property.

So what happens to the 15 months I would have already paid? Doesn’t it count for anything?

Thank you


4 Thoughts on Hazard Insurance?
  1. Reply
    June 10, 2011 at 12:05 am

    I didnt know mortgage companies made you get their insurance. Ask if you can get your own. Talk to an insurance agent, maybe they have experience with this.

  2. Reply
    June 10, 2011 at 12:54 am

    Yes, that’s perfectly normal.

    You pay 12 months upfront. So you’re paid for the entire year forward.

    They put 3 months of insurance into your escrow account. You’ll have made 11 mortgage payments by the time your insurance is due next year.

    They’ll have 12 months worth of it to pay, plus a 2 month cushion. That’s standard, legal, and completely normal.

    The 2 month cushion helps make sure there’s enough money to pay any increases, since insurance usually rises annually. They’ll send you a notice of any increases with a request to pay the difference and get them back up to a 2 month cushion for the new premium amount.

    So yes, it all counts for something. The money builds so it’s ready to pay for the entire year next year. They can’t bother making monthly payments on the millions of mortgage accounts they service, so it needs to be done this way. It protects you, as well, since you’ll never be without full coverage.

  3. Reply
    Nancy Kay
    June 10, 2011 at 1:28 am

    Home insurance is payable and renewable once a year (even though some insurance companies offer payment plans).

    On home purchases, all lenders require one year’s fully paid insurance premium to put the new policy in force, so there’s the first 12 months, which gets paid out in full to the insurance company at closing.

    Then apparently you have selected or they have required you to “escrow” or “impound” insurance premiums for the next year’s renewal. Since your payments typically begin at least a month or more after closing, they collect 3 more month’s worth at closing, so that a month or so before the premium is due next year, they hav enough to pay the new insurance bill for the next full year’s renewal.

  4. Reply
    June 10, 2011 at 2:14 am

    This is correct.
    When you purchase the property you will need to pay a years in advance.
    Then you will need 3 months deposited into your escrow account. (1 month for the closing month as no payment is due and a 2 month cushion.)

    This is standard.

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