Mortgages and fire season

Fire season, much like Christmas, sneaks up on me. Every year.

Two messages to share this week, so I will start with the quicker of the two.

If you (or someone you know) has a mortgage and is affected by the fires, reach out to your mortgage holder as soon as possible.

When I say affected, I mean two things:

• if your home has been lost or damaged and you have been evacuated
• if your employment has been interrupted.

Most financial institutions have toll free numbers to call, and it is essential to update them as to your situation if you are not in the position to make your mortgage payment.

During the last few summers, notably with the fires in Fort McMurray and Williams Lake, most lenders were great to work with and had plans in place to support their clients.

Your local banker or mortgage broker can help you track down contact information if you aren’t able to find it online.

The other important thing to think about right now is insurance coverage if you are in the process of buying a home.

Lenders require that you have home insurance in place before they will finalize your new mortgage.

Many insurance companies will not issue insurance policies within a certain distance of active fires.

One of the conditions written into any Offer to Purchase is the ability to obtain home insurance on the property. Prospective home buyers confirm that they are able to get insurance on a home before they remove this subject.

The kicker is that the initial confirmation of insurance often happens well before the completion date, sometimes a month or two beforehand. Buyers generally firm up their insurance policy the week before their purchase finalizes.

What does this mean during fire season?

One of my clients purchased a townhouse in Rutland and was set to close on Friday. After her offer was accepted in May, she did her due diligence and confirmed that she could get a policy on the home.

She signed off on all the subjects and entered into a firm purchase agreement.

Fast forward two months.

Tuesday night we had a spectacular lightning storm, and the fires started.

Thursday morning, on the way to the appointment with her lawyer to sign her mortgage documents, she stopped in to the insurance broker to pay for her policy.

Much to her horror, she was told that the insurance company will no longer insure the home as it is within 50 kilometres of an active fire.

After a very stressful few hours, her realtor pointed out a clause in her purchase agreement that addressed this exact situation.

The realtor had added a condition that (paraphrasing here) stated in the event she was unable to complete the transaction because she could not get fire insurance due to an active fire/evacuations / alerts, the closing date would be pushed back 30 days to allow for her to find adequate coverage.

Brilliant.

I am not sure how many realtors use this clause, but for my client this relieved an immense amount of stress. She was able to find a different insurer on Friday that has provided coverage, so her story ends happily (apart from an exceptionally stressful day Thursday).

Circling back, there are a couple of lessons to learn here.

• The home buying journey can feel like a bit of a whirlwind. Even though you are busy trying to get things taken care of for your move, try to deal with as many of the important things (ie: home insurance) as soon as possible. Leaving them to the last minute can add stress you don’t need.
• Purchasers often don’t realize the importance of a well written Offer to Purchase. Working with a knowledgeable realtor can make all the difference in how your story ends.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.