What happens to my homeowners insurance when my mortgage is sold?
It can be alarming when a lender sells or transfers your loan to another bank or mortgage company, but there is nothing to worry about.
But what does this mean for you and your homeowners insurance? All it means is a different lender will be taking your payments, paying your insurance, handling your account and answering any questions you have.
Transfers like this are very common (and legal) in the mortgage and insurance industries. Whether or not your servicing is sold has nothing to do with the quality of your loan or your payment history. Of course, you are always welcome to check in on the details of your loan with your lender to ensure the change has not affected your loan or insurance.
Typically, here is what will remain unchanged:
- The original terms and conditions of your mortgage
- The interest rate and duration of your loan will not change on fixed rate loans
- The payment you make should stay the same or on the same schedule
What happens to my insurance policies and taxes if my home loan is sold?
If your loan is sold to another lender and you receive a notice that either your insurance or taxes are due, call your new servicer and make sure they have all the correct information on file. If you have a question after the transfer has taken place, contact your new service provider even if your old service provider was the one who collected the funds for your insurance or tax payment.
- Life & Disability Insurance: Some mortgage companies offer to escrow life or disability insurance that would pay off your mortgage in case of a death or make payments in case of a disability. If you have these policies, your old servicer should inform you of what effect the transfer of servicing will have on this insurance coverage and what action you may need to take to maintain coverage.
- Flood and hazard insurance: It is the responsibility of the old servicer to provide the insurance agent or company with a notice of transfer. The beneficiary is able to be transferred from one company to the other, but it’s smart to double-check that this has happened. It’s important to check that the beneficiary is transferred to ensure that in the event there is a claim, the check will be send to the correct servicer.
Lenders change
Changes happen, but that’s okay! If your home insurance or loan is sold to another financial institution don’t stress out because typically nothing will change for you. Of course, if you have any questions about your mortgage or insurance contact your lender or insurance agent directly for answers.
