When you cannot pay your mortgage payments or you need your lender to cash a check to cover the costs of repairs on your home because of an insurable claim, you'll need the lender to endorse the check you get from the insurance company. The best way to do this is to approach the lender with the check as soon as you receive it. When you and the bank are listed as the payee, no money is paid until both you and the bank endorse the check.
Mortgage insurance, sometimes called private mortgage insurance, is coverage a lender makes you carry when you have less than 20 percent as a down payment on a home. This insurance differs greatly from mortgage life insurance. Mortgage life insurance is coverage you purchase to protect your family if you die before the mortgage is paid off. Private mortgage insurance does not require your death.
Take the check you get from the insurance company and send it to your lender after you've endorsed it. The bank should accept the check and sign it. For other types of insurance claims where the insurer is also covering damage to the home, in the case of homeowners insurance, the lender may require that several quotes be prepared and that the work is absolutely necessary before any checks are signed. The lender may also require an inspection before and after the work is completed.
You benefit from mortgage insurance and other insurance related to owning a home since you are protected from financial disaster. Private mortgage insurance ensures that the bank gets paid. It may also save your credit score as the bank's mortgage payments are being paid during this time. Homeowners insurance benefits you since you are compensated for damages done to your home as long as they are covered under the list of perils the insurer will pay a claim for.
If the lender does not sign the check, this money won't be applied to your mortgage payments. Additionally, any unsigned homeowners insurance check won't be used to pay for home repairs. In this sense, the insurance carries a huge disadvantage. Both the lender and the homeowner need to sign off on the insurance check if it is made out in both names.
Private mortgage insurance carries another disadvantage. This insurance may protect your credit score if you cannot pay your mortgage payment, but the insurance is intended to protect the lender from your default. The lender makes you pay for this insurance. This means that the lender receives a guarantee from you and from the insurer, but does not need to pay for it. This increases your mortgage payment beyond what it otherwise would be.
- "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
- "Ernst & Young's Personal Financial Planning Guide, 5th Edition"; Martin Nissenbaum, Barbara J. Raasch, Charles L. Ratner; 2004