When applying for a mortgage, you may discover that you are unfamiliar with some terminology and parts of the contract. Because most people aren't familiar with the language used in legal contracts, some initial uncertainty is to be expected. However, you should understand as much as possible about your contract before signing it.
Mortgage lenders (also known as mortgagees) put in place specific measures during the contracting process to ensure that the collateral for their investment – your new home – is protected. The mortgagee clause is one such measure. Let's take a closer look at what it is and how it may affect you and your lender.
A mortgagee clause is a provisional agreement between a mortgage lender (the mortgagee) and a property insurance provider that protects both parties. This sort of clause protects the lender from financial losses if the mortgaged property is damaged, as it compels the insurer to guarantee payouts in the event of any claims covered by the property insurance policy. Mortgagee terms are frequently referred to as loss payee clauses or mortgage clauses.
The mortgagee clause is an important element in a property insurance policy that guarantees that the insurance company will pay the mortgagee if the mortgagor's property is lost or damaged. The clause is a crucial safeguard for mortgagees who want to protect their investment in a mortgagor's home; therefore, it is important that your insurance policy always have the most current mortgagee clause listed.
In the event that you receive notice stating your mortgage has changed, please be sure to always notify our agency of the new mortgagee clause and the new loan number, if it has changed.