Rental Property Insurance Tip – Lender Requirements

So you’ve just committed to refinancing your rental property. You’ve got the new cap rate all worked out. Your going to pocket some extra money this year. Then two days until closing, your lender asks for your insurance. You gladly hand over your Evidence of Property Insurance that your insurance agent provided. The lender promptly rejects it accompanied by a breakout of the requirements they had set forth on about page 200 of your loan document.

What you see on the page seems to be a foreign language. You ask yourself, “What’s Agreed Value?, What’s an Admitted Carrier?, What’s Law or Ordinance?”, to name a few of the items popping out at you. And then you see the coverage amount is much higher than the limits you have now. You remember vaguely your discussion with your insurance agent about rebuild cost vs. market value vs. loan value. What to do? Will these items affect the price of your coverage, potentially ruining a big chunk of savings from the refinancing? Chances are, yes. In fact, you may not be able to meet all of their requirements. Not all lenders and loans are created equal.

So, when shopping for a loan or refinancing, make sure you gather each lender’s requirements and let your insurance agent review them. If the agent is experienced enough in this particular area, they just may be able to negotiate some of the more unnecessary or arduous requirements. For instance, here in Harris County, Texas, there are no admitted carriers writing multifamily housing and very, very few writing shopping centers, let alone single family tenant occupied properties.

These are some of the topics we’ll be discussing each month in this section. Stay tuned…