Do I have to buy HO6 when refinancing loan? Bank don't fund the loan after signed all the documents week ago. What should I expect if I?

Asked by tweety, Fremont, CA Tue May 18, 2010

don't buy HO6?

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Jim Rosa, Home Buyer, Key Largo, FL
Sat Jun 15, 2013
What a deal? If you ever have to use this insurance they will nickle and dime you, charge you a huge deductable and then raise your future rates! Thats the order! The banks love this insurance if your property is destroyed they can salvage more from it! The stove refrigerator and others are considered part of the unit that belongs to the bank! Realitors just want to make a commision on the sale and you just want to buy the unit! We as the owners have no choice! Lets put it that way! If you want to buy its required! Just think of how much money the insurance agencies make selling this to all! Now imagine how many claims are actually paid! It's a cash cow, and only one person wins!
Don't buy in to these stories, and when you talk to insurance sales people, they always have stories about how some guy somewhere won big on a claim!
To sum it up for what it is! You are required to buy and they are not required to pay out but love the money you send them!
a home home owner
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Julie Rice T…, , San Mateo, CA
Wed May 19, 2010
I think it is important to explain to you why HO6 insurance is important to you, as the owner of this condo. This insurance protects your investment, inside the walls of your condo. The insurance your HOA carries protects your condo outside the walls.

Let's say you go away for a weekend and you decide to run your dishwasher so you have clean dishes when you return, and while you are gone, a water pipe bursts and water is running all weekend. Your HO6 insurance will cover all that damage to your dishwasher, floors, carpet, cabinets, etc. And typically, depending on the price of your condo, this insurance only runs you about $200 - $300 a year! What a deal!

Lenders did not used to require this type of insurance, which is why you were able to purchase your condo without it. But lenders want to protect their collateral, inside and out. Significant damage can happen inside your home. What if you have a kitchen fire? Your HO6 insurance will cover it.

This is a great value, and lenders should have been requiring it all along. As for what happens if you do not buy it? You more than likely will not be able to complete your refi.

Good luck!
Julie Thall
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Jacob Varghe…, , San Jose, CA
Wed May 19, 2010
There is an ancient saying "If you have the money to buy an elephant, then you should also have the money to buy a chain to handle the elephant".

Insurance is necessary. It transfers the risk to the Insurance company. No lender will want to lend without coverage. I am surprised how they let you sign without coverage.
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Lew Corcoran, Agent, Easton, MA
Wed May 19, 2010
Unless you can document that the condominium’s master policy provides replacement coverage for the interior of each unit, you must obtain a "walls-in" coverage policy (commonly known as HO-6 policy). The HO-6 insurance policy must covers at least 20% of the unit's appraised value, and must cover fixtures, equipment, and other personal property inside the individual.

If you do not obtain an HO-6 policy, the lender will not fund your loan. As you said that you signed the documents a week ago and that you have not yet obtained coverage, your new loan has most likely been cancelled. You will have to obtain HO-6 insurance coverage and most likely will have to go through settlement again.
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Nicholas, , San Francisco, CA
Wed May 19, 2010
If your hoa insurance does not include ho6 (walls-in coverage), your bank may not fund the loan. They should have explained this to you before you signed all of the documents, typically you will need a policy quote at the very least, with a policy to be bought at closing to cover the interior of your unit. It should be pretty cheap though, it's like renters' insurance.
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