# Do you still have to pay the mortgage if your house burns down? **URL:** \ **Category:** Factual Questions\ **Created:** [November 24, 2018, 7:23pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018 "2018-11-24T19:23:54Z")\ **Posts on this page:** 19\ **Page:** 3
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [November 26, 2018, 12:05pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/41 "2018-11-26T12:05:22Z")
Mortgage lenders do not require life insurance in the US. If the borrower dies, they can claim against the estate like everyone else. The heirs can’t be burdened with the debt, unless they co-signed on the loan. ---
**Author:** ![Dead\_Cat](https://avatars.discourse-cdn.com/v4/letter/d/9fc29f/32.png) [@Dead\_Cat](https://boards.straightdope.com/u/Dead_Cat)\ **Post date:** [November 26, 2018, 1:40pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/42 "2018-11-26T13:40:12Z")
IME, UK lenders do not require you to take out life insurance with them - it is an add-on that they will nearly always try to sell you, but it is perfectly possible to arrange a mortgage without taking insurance from the same company. I’m not sure they even require proof that you are adequately insured elsewhere, they just have prominent warnings that you should do this. ---
**Author:** ![Corry\_El](https://avatars.discourse-cdn.com/v4/letter/c/ecae2f/32.png) [@Corry\_El](https://boards.straightdope.com/u/Corry_El)\ **Post date:** [November 26, 2018, 3:33pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/43 "2018-11-26T15:33:26Z")
> [@friedo](#): > > Mortgage lenders do not require life insurance in the US. If the borrower dies, they can claim against the estate like everyone else. The heirs can’t be burdened with the debt, unless they co-signed on the loan. I basically agree but note a few things 1. In the US per federal law heirs can usually assume mortgages, lenders can’t demand acceleration (immediate payment of the remaining balance). And once and if the heirs do assume it, they could put personal assets at risk in a recourse state. But they can always decide not to assume it if they think they can’t make the payments, or just want to sell it for any other reason. 2. But, the mortgage lender has first claim on proceeds from selling the house if it is sold. They only get in line with every other creditor of the estate if the house proceeds are less than the mortgage balance. 3. The bank’s claim on the house could be viewed as ‘falling on the heirs’ _relative to_ simply getting the house free and clear as they would if insurance paid off the mortgage when the person died. But you’re right that the lender can’t go after assets of the heirs outside the estate unless coincidentally the heirs were co-signers of the loan before inheriting the house, or potentially if they assume the loan after inheriting the house. ---
**Author:** ![Jackmannii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jackmannii/32/311_2.png) [@Jackmannii](https://boards.straightdope.com/u/Jackmannii)\ **Post date:** [November 26, 2018, 5:10pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/44 "2018-11-26T17:10:57Z")
Thanks to the thread title, I’ve got [this stupid Julie Andrews song](https://genius.com/Julie-andrews-a-spoonful-of-sugar-lyrics) going through my head. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [November 26, 2018, 6:50pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/45 "2018-11-26T18:50:51Z")
> [@LurkerInNJ](#): > > This has absolutely nothing to do with the situation at hand. You can’t get a mortgage without the property (structure) being insured. The lender is listed as an additional insured. Insurance is paid a year in advance and is generally escrowed. If your insurance lapses for whatever reason, the lender will take out a policy and add it to your mortgage payment. They absolutely will not allow it to be uninsured. It’s a condition of your loan. > > If your house burns down, the insurance company pays to rebuild it. You keep paying your mortgage as usual. Nothing changes. If you default on your loan, your lender will make sure the insurance is paid to protect their investment. > > If you paid cash for your home and chose to not insure it, that’s on you. You’re on your own. A lot of this isn’t correct. Impounds where the insurance payment is taken in escrow anually isn’t a state requirement, though some carriers may require it. My mortgage company isnt listed as additional insured. Insurance can also be paid in installments rather than annually. The mortgage company will place a lien on the property though. It could and will likely be a condition of the loan to maintain adequate insurance, but without impounds this can fall by the wayside for a short time. * * * It’s not difficult at all to get standard HO-1 or HO-3 coverage in northern CA. Some areas are more difficult, bit CA offers a FAIR plan which acts as the insurer of last resort. It costs more, but people will be able to get coverage. I believe standard HO-3 coverage includes 125% towards replacement costs to help offset underinsurance. The homeowner is on the hook for regular payments to the mortgage company as no circumstances have altered that arrangement. ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [November 26, 2018, 7:02pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/46 "2018-11-26T19:02:26Z")
> [@Mr\_Quatro](#): > > It is almost impossible to get fire insurance in Northern California That’s not remotely true. Even the really big fires that we have burn down single-digit thousands of buildings. There are tens of millions of buildings in California. That’s an easily insurable risk. ---
**Author:** ![Melbourne](https://avatars.discourse-cdn.com/v4/letter/m/b5e925/32.png) [@Melbourne](https://boards.straightdope.com/u/Melbourne)\ **Post date:** [November 26, 2018, 11:06pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/47 "2018-11-26T23:06:51Z")
> [@friedo](#): > > Mortgage lenders do not require life insurance in the US. If the borrower dies, they can claim against the estate like everyone else. The heirs can’t be burdened with the debt, unless they co-signed on the loan. In Aus, the lender may force you to take out Mortgage Insurance. I suspect that this might be similar to what was called “force-placed” insurance above. The effect of “Mortgage Insurance” is that the bank doesn’t see a loss, whatever your reason for not paying (eg, dead). But it doesn’t let you off the hook: now you (or your estate) owe the money to the insurance company. Compulsory life insurance doesn’t provide the same protection to the bank (if you contract a bad drug habit and stop paying), but it’s much better for your widow. I still don’t understand the original question: > [@Mr\_Quatro](#): > > What happens to the mortgage is you don’t have fire insurance? > > Do you keep paying for something that’s not even there anymore? Your land is still there. My land, is worth 4 times what my building is worth, so the mortgage was worth 5 times what the building is worth. If my house burned down without insurance, I’d get another loan and build a new house. If I walked away, the bank would get the land (worth more than the loan). If there was any shortfall, the bank would, in order of preference, chase, negotiate, bankrupt or abandon: I live in a full-recourse country. ---
**Author:** ![Snnipe\_70E](https://avatars.discourse-cdn.com/v4/letter/s/b5a626/32.png) [@Snnipe\_70E](https://boards.straightdope.com/u/Snnipe_70E)\ **Post date:** [November 27, 2018, 7:24am UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/48 "2018-11-27T07:24:04Z")
> [@Bone](#): > > A lot of this isn’t correct. Impounds where the insurance payment is taken in escrow anually isn’t a state requirement, though some carriers may require it. My mortgage company isnt listed as additional insured. Insurance can also be paid in installments rather than annually. The mortgage company will place a lien on the property though. It could and will likely be a condition of the loan to maintain adequate insurance, \*\*but without impounds this can fall by the wayside for a short time. > > * * * > > \*\* > > The homeowner is on the hook for regular payments to the mortgage company as no circumstances have altered that arrangement. It is not going to fall by the way side. Every mortgage I have chosen to not have a escrow account. I have paid my insurance and taxes myself. But the insurance company will notify the mortgage company if I do not make payment or cancel the policy. More than once when changing insurance companies the new insurance company did not send a binder to the mortgage company. I get a nice letter from the mortgage company stating that my old insurance policy will be expiring on the date when it will laps. And if I do not send proof of replacing said policy they will be taking out a insurance policy for me and adding it to my mortgage as per the mortgage contract. I had to call the insurance company and have them send a binder over. Also any time I have changed companies and the insurance company sends a binder over I get a notice from the insurance company and the mortgage company. So it should not fall by the wayside. ---
**Author:** ![Lord\_Feldon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lord_feldon/32/341_2.png) [@Lord\_Feldon](https://boards.straightdope.com/u/Lord_Feldon)\ **Post date:** [November 27, 2018, 7:58am UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/49 "2018-11-27T07:58:59Z")
> [@Melbourne](#): > > Your land is still there. My land, is worth 4 times what my building is worth, so the mortgage was worth 5 times what the building is worth. Most homes in the USA are not in that kind of extreme property market. The norm here is for the building to be worth more. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [November 27, 2018, 5:06pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/50 "2018-11-27T17:06:23Z")
> [@Snnipe\_70E](#): > > … So it should not fall by the wayside. It should not, yes. But it could, for a short time. And if all the moving parts between the insurance company and mortgage company don’t play well together, that could extend the time. A day, a few days, etc. ---
**Author:** ![Irishman](https://avatars.discourse-cdn.com/v4/letter/i/b487fb/32.png) [@Irishman](https://boards.straightdope.com/u/Irishman)\ **Post date:** [November 27, 2018, 6:28pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/51 "2018-11-27T18:28:00Z")
> [@Snnipe\_70E](#): > > Being under insured will not be a problem for the bank. Assume you purchased a home and have a $300,000 loan on it. Your insurance is for enough to rebuild when the loan was taken out, maybe $250,000. Time passes building costs go up. Now it would cost $400,000 tp rebuild after a fire. You are under insured and insurance will pay only $250,000. YOu walk away. > > Insurance writes check to bank for the amount of the loan. If the loan balance is under $250,000 bank is paid off and happy. YOu now own the land and get the difference. If the loan is still more than $250,000 bank gets $250,000 and forecloses on the land. They sell the land for enough to pay off loan and expences, you get nothing. What does it mean to walk away from the mortgage but then still own the property? ---
**Author:** ![skdo23](https://avatars.discourse-cdn.com/v4/letter/s/a5b964/32.png) [@skdo23](https://boards.straightdope.com/u/skdo23)\ **Post date:** [November 28, 2018, 9:45pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/52 "2018-11-28T21:45:11Z")
> [@thelurkinghorror](#): > > Will I have enough money left over for handsome cream? I’ll ask Optimus Prime next time I see him at the Synagogue. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [November 28, 2018, 11:03pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/53 "2018-11-28T23:03:30Z")
> [@Irishman](#): > > What does it mean to walk away from the mortgage but then still own the property? I don’t think that’s what he meant. You own the house and property, subject to a mortgage (loan) of $300,000. the house burns down. You were insured for $250,000 which seemed adequate when you bought the property, but labour and materials have gone up. (Simple math - $300,000 minus house of $250,000 suggests land is worth $50,000? Of course, every value varies over time…) It will cost $400,000 to rebuild. You get $250,000 from the insurance company (they may hold it back until the bank settles with you on a course of action). You can either - keep the land, give the bank $250,000 from insurance, and owe the bank $50,000 but no house. - walk away, the bank keeps the $250,000 and forecloses on the land, tries to sell it, and depending on the state and land values, you either get something over $50,000 or it sells for less and you owe the balance depending on state laws. -arrange a loan for up to $150,000 to rebuild. But now you owe (conveniently) $450,000 for a house worth $450,000(?) with land. The first option - no great benefit unless you think you can sell the land for more. Second option, best if the land is worth less (market crash, or town destroyed) and the bank has no recourse. Third option, win-win for bank provided you can afford payments. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 29, 2018, 1:45am UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/54 "2018-11-29T01:45:49Z")
> [@nearwildheaven](#): > > I got earthquake coverage when I lived in southern Illinois; I was close enough to the New Madrid Fault that I felt it wasn’t a bad idea. It was about $30 a year. Given that the first earthquake I went through was in Urbana, not a bad idea. For $30 a year that is. ---
**Author:** ![spifflog](https://avatars.discourse-cdn.com/v4/letter/s/c5a1d2/32.png) [@spifflog](https://boards.straightdope.com/u/spifflog)\ **Post date:** [November 29, 2018, 4:53pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/55 "2018-11-29T16:53:40Z")
> [@senoy](#): > > It depends on the state. About a dozen are ‘no-recourse’ states which mean if you default, the bank gets the property and you’re even. In ‘recourse’ states, yes, you owe it. You’re taking out a loan. It’s a loan secured by an asset, but still a loan. If you owe say 100k, the house burns down and the bank can sell the ashes for 10k, then the bank can come after you for the remaining 90k. > > In this particular case, California is no-recourse, so their credit score will take a hit, but they can walk away without owing more. Says all you need to know about California. ---
**Author:** ![Melbourne](https://avatars.discourse-cdn.com/v4/letter/m/b5e925/32.png) [@Melbourne](https://boards.straightdope.com/u/Melbourne)\ **Post date:** [December 5, 2018, 3:02am UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/56 "2018-12-05T03:02:43Z")
> [@md2000](#): > > I don’t think that’s what he meant. > > You own the house and property, subject to a mortgage (loan) of $300,000. the house burns down. You were insured for $250,000 which seemed adequate when you bought the property, but labour and materials have gone up. > > (Simple math - $300,000 minus house of $250,000 suggests land is worth $50,000? Of course, every value varies over time…) Cripes. My mothers land is worth around $750,000. Her house has negative value: some one will pay to have it knocked down when her estate sells. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [December 6, 2018, 5:51pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/57 "2018-12-06T17:51:04Z")
Another point of information - The Camp Fire in Paradise is still very recent, but there is some experience in last year’s Napa fires. At the lienholder’s option, they can examine their collateral (the property) and if in their view the collateral is no longer sufficient they can call the loan. The insurance company could issue a check and pay off the loan, and the difference would go to secondary lienholders, then the homeowner. Afterwards, the homeowner then owns the land free and clear, and can use the proceeds however. This has happened at some of the Napa properties. ---
**Author:** ![Rhiannon8404](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/rhiannon8404/32/17929_2.png) [@Rhiannon8404](https://boards.straightdope.com/u/Rhiannon8404)\ **Post date:** [December 6, 2018, 6:36pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/58 "2018-12-06T18:36:47Z")
> [@Mr\_Quatro](#): > > It is almost impossible to get fire insurance in Northern California > [@iamthewalrus\_3](#): > > That’s not remotely true. But it is true for remote areas. My mother lives in the foothills, east of Sacramento, south of Placerville. She doesn’t have a mortgage, so she pays her homeowner’s insurance annually. Last year it went up significantly. She tried to shop around for a lower rate, but found that only one out of all the major insurance companies would even cover her. Most replied that they were not issuing new policies in that area. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [December 6, 2018, 8:48pm UTC](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018/59 "2018-12-06T20:48:30Z")
> [@Rhiannon8404](#): > > But it is true for remote areas. My mother lives in the foothills, east of Sacramento, south of Placerville. She doesn’t have a mortgage, so she pays her homeowner’s insurance annually. Last year it went up significantly. She tried to shop around for a lower rate, but found that only one out of all the major insurance companies would even cover her. Most replied that they were not issuing new policies in that area. Everyone in CA can get basic property insurance because CA created the [FAIR plan](https://www.cfpnet.com/). It acts as an insurer of last resort and is available to all, anywhere in the state. It’s not “almost impossible” to get fire insurance in CA - rather the opposite. Everyone can get fire insurance in CA. It may be pricey though. [Previous page](https://boards.straightdope.com/t/do-you-still-have-to-pay-the-mortgage-if-your-house-burns-down/825018.md?page=2)