Why can’t I apply my fire insurance check to my mortgage?

My lender is holding onto a fire insurance check for $235,00 that I would like to apply to the mortgage so i can sell the property as is and start fresh. I still owe $280,000 on the mortgage and my land is worth $60,000. It’s been over 1 1/2 years. Every time I call them I get the run around now they are saying that they will not apply the insurance check until the mortgage is paid in full. I have been living with relatives and would like to start my life over.

Asked on August 2, 2012 under Real Estate Law, New Hampshire


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

The reason why you probably cannot apply your insurance settlement check to your unpaid mortgage is that the mortgage probably has a provision within it stating that the security for the loan if damaged and there is an insurance pay out must be repaired with insurance funds.

As such, I suggest that you carefully read your mortgage (trust deed) on the issue you are writing about. Most likely your answer will be there.

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