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Hidden Divorce Mortgage Mistake - Home Insurance?

By Kelly Lise Murray

Services for Real Estate Pros with DivorceThisHouse.com

January 15, 2009 09:29 PM

Another hidden danger of divorce mortgages - home insurance

Did you know home insurance is required to close or keep a mortgage? If the house you buy (or keep per divorce) is later found to be uninsurable, the lender (based on contract language in the loan documents) can call the loan - essentially canceling your mortgage before it's barely begun.

Did you know pending insurance claims on a house will likely prevent a mortgage from closing?

Another casualty - your credit score: In divorce, if you cannot individually qualify for home insurance on the family house you own with your EX, you cannot individually refinance the mortgage.

Many of the dangers from owning a house without home insurance are obvious. But if the marital joint mortgage is not individually refinanced, you and your EX are still linked through a major debt - the mortgage. One late mortgage payment drops both of your credit scores (20-100 points); foreclosure is reported on both spouses' credit reports. As a result, you're not really divorced - financially speaking.

Solution - more information: To check your home insurance "health," ask your insurance agent for a copy of the C.L.U.E. report for your house. C.L.U.E. stands for Comprehensive Loss Underwriting Exchange. Under federal fair credit laws, home owners are entitled to one free C.L.U.E. report per year. www.choicetrust.com or http://tinyurl.com/dm67d

As always, a licensed insurance professional can help you determine your best options now for a stronger financial future.

www.DivorceThisHouse.com

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Jim Dvorovy

Cutler Real Estate - Canton, OH

REALTOR - Canton Ohio Real Estate

When I bought my present home, all seemed to be fine, mortgage went through, homeowners paid one year in advance. 30 days after moving into the home, I received a letter from my major brand name insurer that my homeowners insurance had been canceled. Included was a check for remaining 11 months coverage due to cancellation. Reasons cited was the house needed a new roof and front steps needed put back into proper place. I felt betrayed, as I had been with that major insurer for 22 years with a total family policy (multiple auto policies including two beginning drivers, and two residential policies) with very minor claims against the insurer all throught those years.

Once dropped by that major insurer, it was impossible to find coverage with a different major insurer. I finally did get insurance from a smaller company and have been with them ever since. My new agent told me the reason cI had trouble getting insurance was that there were several insurance claims against the property I had purchased. A CLUE report would have shown that, but I knew nothing about that.

Eight years have gone by and my old insurer keeps sending me letters asking me to come back into their good hands. They just don't get it.

Jan 15, 2009 10:18 PM

Charlie Ragonesi

AllMountainRealty.com - Big Canoe, GA

Homes - Big Canoe, Jasper, North Georgia Pros

Very interesting post and I have read your series. This is great info and thank you so much

Jan 15, 2009 11:28 PM

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Kelly Lise Murray

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