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How Home Insurance Is Affected When Refinancing A Home

2010-08-13

There are many reasons that refinancing homes can change the rate of the home insurance. No matter why the home is being refinanced, the insurance rates will have to change somewhat to reflect the new financial situation of the home in question. The insurance rates may be changed simply because the value of the home is being assessed in detail for the first time since the original mortgage was agreed upon. Changes in the home since that first mortgage can impact your insurance rates in a positive or negative way depending on what the changes are.

Refinancing Involves Assigning a New Value

When a mortgage is refinanced, the bank or mortgage holder usually requires that the value of the home be completely assessed as if the home were being sold. That means that an agent will look at every aspect of the home to determine its current value, regardless of the stated value that was established when the original mortgage was signed. Any changes in the value of the home will have a direct impact on the amount of home insurance that you pay. If you have made renovations to the home it may be worth more than it was before, which will make the insurance more expensive. If the neighborhood has deteriorated, however, your home's value may have gone down and you may end up paying less for home insurance.

Mortgage Changes Impact Insurance Rates

Refinancing homes requires that a new mortgage be drawn up by the lending agent. The terms of the new mortgage can have an indirect impact on the amount that you pay for your home insurance. The type of refinancing that you opt for can also have an affect on home insurance rates. People who are considering refinancing their homes should speak with their home insurance agents to find out how the refinance process will impact their particular home insurance policy.

Changing Insurance Companies During a Refinance

Another home insurance change that can happen during refinancing homes is that the homeowner chooses to use a new home insurance company during the refinance. Since refinancing homes is very similar to purchasing a new home, the process of finding a new home insurance policy is much the same as finding the original insurance policy when you first bought the home. That makes refinancing the perfect time to shop around for a better home insurance policy rate than you have been paying. Take your time and look into home insurance quotes based on your home's newly established value and the type of mortgage that you signed during the refinancing process. You may find that you can save a substantial amount of money on your home owner's insurance as well as your refinanced loan.