Unfortunately, you still owe the bank money but there are ways to soften the blow
The recent disastrous wildfires in Southern California are an extreme example of the challenges homeowners face after their home is destroyed or seriously damaged. But a fire, flood or other disaster can strike almost anyone so it's worth facing some unpleasant facts.
Your friends will feel sorry for you, politicians will pledge their support and your family may raise a few dollars through Gofundme and, we hope, you insurance willpay off promptly, assuming you've been able to get insurance.
But whether or not those things happens, the stark truth is that you are still responsible for the mortgage payments, insurance premiums, property taxes and, if applicable, your HOA payment.
Let's review a few salient, if unpleasant, facts:
Mortgage Obligations
- You still owe your mortgage. Even if your house is gone, youre still required to pay the remaining mortgage balance unless your lender provides relief.
- Relief options:
- Disaster forbearance: Temporary suspension of mortgage payments. You must contact your lender to request this. Do this sooner rather than later. It may take time and time, as always, is money. Don't waste it.
- Repayment plans: Options include lump sum payments, payment deferrals, or mortgage modifications to make your repayments manageable. Lenders will usually grant you a few months of forbearance, meaning you don't have to pay right away but the unpaid amount will get tacked onto the end of yourmortgage.
Property Taxes
- Tax payments still apply: Youre still required to pay property taxes, but natural disasters might reduce what you owe. If your house is now a pile of ashes, its value is drastically reduced.
- Relief Options:
- Delayed Payments: Contact your local tax collector to request a delay.
- Reassessment: If your property value decreases due to damage, you can apply for a reassessment to reduce taxes. This may happen automatically but you should be ready to press the issue and to document how much your property's value has decreased.
Seek Assistance
- FEMA: While FEMA doesnt help with mortgage payments, it does provide support for temporary housing, repairs, and other disaster-related needs.
- Act Quickly: Contact your mortgage servicer or local tax office as soon as possible to explore relief options. You need to start the process quickly, since it may take a long time to complete.
Be sure to keep making your mortgage payments if you don't arrange a forbearance agreement. You legally owe the money and if you stop making mortgage payments, you'll be considered late, which can damage your credit. You could eventually default and lose your property.
In places like Southern California, where much of the property value comes from the land rather than its structures, you should take care to avoid this outcome even if your home has been destroyed. The land is very valuable and you don't want to lose it.
You can apply for FEMA assistance, assuming your home is in a designated diseaster area, and find applications and information on the FEMA site.
Photo Credit: Consumer Affairs News Department Images
Posted: 2025-01-27 06:14:05
