Do I need to contact my mortgage provider(s)?
Yes. The best advice is to call your mortgage provider to understand what options you have and your responsibilities. Let your mortgage provider know the status of your home and if you have more than one mortgage provider. Your insurance coverage provider generally has a dollar value that is associated with your home, so information is key. Knowing how much you owe and to whom is very important.
If I choose to rebuild my home, what are my responsibilities? If you have a mortgage provider, they would have lent you money based on the type and value of your home. If you choose to rebuild your home, it must be equal to, or greater than, the value of your previous home.
How do I determine the value of my home?
Contact your mortgage provider. They would have a value based on when they lent you the money. An appraisal would need to be completed on the replacement to ensure the value would be equal to, or greater than, your previous home.
Can I rebuild my home with a different style of house?
Talk to your mortgage provider. They would have to approve all changes. Significant differences to the footprint of your house can be complicated.
Who is responsible for the mortgage payments while my home is being rebuilt?
Your mortgage would still be in place, so you are responsible for making your regular mortgage payments. However, your mortgage provider may have additional options for you such as deferring, capitalizing or missing payments. These options add the missed payments to the end of your term, which helps in the short term. However, you will pay more interest since your mortgage will be extended. Talk to your insurance adjustor to determine if you have living expense coverage within your policy.
What if I want to walk away from my home?
In most cases, it depends if you have a mortgage and if that mortgage is insured. If you have a mortgage and the insurance does not cover the entirety of the amount owing, you could be left with a judgement against you (you must pay), which includes the difference in the amount owing and all costs associated with it. Talk to your mortgage provider to discuss these options.
Who can re-build my home?
If you have a mortgage provider, they would want a professional builder with a New Home Warranty to re-build your home. This will protect you and the mortgage provider if there are any defects in your re-built home.
What if I want to be the contractor/general manager for my home re-build?
As long as you are fully licensed and insured, you can discuss these options with your mortgage provider. However, it is a longer process and will take a lot more documentation. Always talk to your mortgage provider before making any decisions.
What if I want to replace my home with a mobile home?
The mortgage provider will want to make sure the value of the home is equal to, or greater than, the value of your previous home, so an appraisal will be done. A PPSA (personal property security assignment) will need to completed on the new replacement mobile and a purchase contact will need to be provided. The age of the mobile unit is important since they tend to lose value quicker than a normal home. Generally speaking, the bank will want to see a home newer than 15 years.
Who is payable on the insurance cheque?
If you have a mortgage on your home, the first loss payee is normally your mortgage provider. The insurance cheque will be made out to both you and your financial institution and will be required to be endorsed by each payee before being cashed. Your mortgage provider will endorse the cheque when the home is re-built. We recommend working with your insurance company and mortgage provider to establish an agreement on how and when claim proceeds will be disbursed.
What about other items such as municipality taxes, utilities or city permits?
Talk to your local municipality and utility companies. If you are rebuilding, your local municipality will be able to provide you a list of items you will need before you start to rebuild, such as obtaining development and clean up permits.
If the insurance cheque pays off the mortgage, who owns the land?
The land is owned by the customer once the mortgage is paid off in full.
If the insurance cheque does not pay off the mortgage, can the bank go after the land?
Yes and the bank will as that would be its next recourse. If the mortgage is a CMHC/Genworth/Canada Guaranty insured mortgage, they will usually insist that the bank rehabilitate the lot, re-build an appropriate structure and then sell it on the open market. Once all proceeds are received, they are used to pay down (or fully pay) the mortgage and associated costs. If there is a shortfall after all funds are used, then the mortgage insurer will pursue the customer through legal action to recover monies owed. If the mortgage is not in this category, the bank writes off any deficiency and has no recourse to the customer.
If the bank sells the land to pay off the mortgage, does the owner get what is left after the mortgage is paid?
This answer depends on the type of mortgage. If it is a CMHC/Genworth/Canada Guaranty insured mortgage, any surplus goes back to the customer after all costs are paid. If the mortgage is not in this category, (conventional) any surplus after costs would be kept by the bank.
What can the owner do with the land, if he does not rebuild? Can he just walk away from it or does he have to sell it?
So long as the mortgage is outstanding, the customer is obligated to rebuild a structure equal to or of greater value than the previous one. If they do not rebuild, they are required to pay off the mortgage in full. This is because the bank mortgaged a residence and not raw or serviced land with their mortgage. Paying out the mortgage can be done using various resources such as their Fire Loss insurance settlement, personal funds and/or selling the land if possible. Some banks do offer mortgages for raw or serviced land only, however the customer would need to apply for that as a separate mortgage as the original one would need to be extinguished. Proceeds from the new raw-land mortgage could be combined with the insurance settlement to pay off the original mortgage. Finally, at any point in time an owner can walk away from a home, however the bank will still receive the insurance settlement and if there is a subsequent shortfall on the mortgage, it will pursue legal action (judgement/foreclosure) to recover the deficiency.
Is there value in the land? Yes, there is value in the land.
However, the customer should contact their local municipality to find out what the rules are regarding sale of a serviced lot. Specifically, they should find out what, if any, reclamation/rehabilitation is necessary to make the lot saleable. Any costs associated with rehabilitation of the land must be paid by the customer. The actual land value is predicated on open market conditions.
Who is responsible for the upkeep of the land or liability from injury on the land?
This would depend on who is the registered owner of the land. If the customer is still in possession, they would be responsible however if they decide to walk away and the bank takes possession it would be responsible. All upkeep costs incurred by the bank prior to disposal are added to the mortgage debt.
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