Comment by CalRobert
1 day ago
For what it’s worth, you can get a house with no insurance or mortgage. They tend to be cheap. I had an uninsured thatched cottage for a while, it was 68k
1 day ago
For what it’s worth, you can get a house with no insurance or mortgage. They tend to be cheap. I had an uninsured thatched cottage for a while, it was 68k
You can have a mortgage with no insurance (after purchase day) here in New Zealand. The bank won’t like it, but also won’t know.
You are right that you can get away with it in NZ.
For total loss then bankruptcy might save you money (assuming you have no other assets or kiwisaver; since you still owe the debt).
But part of the contract with the bank is allowing the bank and insurance company to verify/update.
If you cancel your insurance, the insurance company is incentivised to tell the bank since you will probably sign up for insurance again when told to by the bank. I don't believe the banks or insurance have push updates. I would guess banks batch check if insurance is still live annually?
I live in Christchurch and I believe insurance is valuable risk management - plenty of people gambled and lost with Earthquakes. That said: I own an as-is house because I bought a 3 bedroom on 800m2 for $190000 (cheap because you can't get a mortgage for it because it is uninsurable due to subsidence - I only paid land price).
(For those unfamiliar - $190000 New Zealand is roughly $106,000 US, and 800m2 is about 1/5 acre. I know neither Christchurch real estate nor its geology - but obviously that 1/5 acre carries a big "will it keep subsiding?" caveat.)
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Banks in Australia were the same, but some are now starting to demand proof of insurance yearly to counter that loophole.
What's the thinking here? The bank is loaning you money and they want to ensure you buy a particular product.
They're the ones with the money. They can easily guarantee that you buy the product they want. All they need to do is give you less money, buy the product themselves, and give it to you.
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You can do that in the US too. As well the banks won't like it, so what they'll do is protect their assets with force-placed insurance that you pay a hefty premium for.
A quick google suggests a similar situation in that there's no legal mandate but most lenders in NZ require insurance.
What did you do for liability insurance?
For the first year I had a policy similar to what farmers use for ag land, then it got cancelled and I was uninsured, which wasn’t ideal.
I sold the house after a while, it was an interesting experiment in cheap living but ultimately it wasn’t great.
Annoyingly I couldn’t insure it because it was thatched, and I couldn’t change the roof because of heritage. The Irish government has screwed over thatch owners brutally.