Do I have to pay a mortgage on condemned property?

Mortgage Obligations Persist Despite Condemnation

When a property is condemned, it means that local authorities have deemed the property uninhabitable or unsafe. Contrary to popular belief, this does not automatically release you from your mortgage obligations. Typically, you are still required to make mortgage payments until the issue is resolved or the property is vacated. Here's a detailed look at the ramifications and options you have in this situation.

Mortgage Contract and Obligations

A mortgage is a legal agreement to repay a loan. Once you sign this contract, you are bound to adhere to its terms regardless of the condition of the property. Whether your home is condemned or not, the mortgage remains in effect. Failing to make the payments can result in foreclosure and the loss of your credit score, as the bank has the right to sell the property and may pursue you for any remaining balance.

Impact on Insurance

When a property is condemned, it's crucial to review your homeowners insurance policy. Depending on your coverage, certain damages or losses may be covered, but the extent of this coverage varies widely. For instance, some policies may cover water damage or structural issues, while others might not. It's wise to consult your insurance provider to understand exactly what your policy covers in the event of condemnation.

Negotiating with Lenders

If you are facing severe financial hardship due to the condemnation, you might consider negotiating with your lender for a loan modification or forbearance. These options can help you manage your mortgage payments temporarily and potentially avoid foreclosure. However, you should familiarize yourself with the specific terms and conditions of such agreements.

Seeking Legal Advice

In any situation involving condemnation and mortgage obligations, it is highly advisable to consult with a real estate attorney. Local laws and regulations can significantly affect your rights and responsibilities. A knowledgeable lawyer can provide guidance tailored to your specific circumstances and help protect your interests.

Financial Impact and Property Value

The condemnation of a property often results in a significant drop in its value. This can have a profound impact on your overall financial situation, especially if you still owe a substantial amount on your mortgage. In some cases, the property taxes might even increase, as you mentioned in the case of Hurricane Harvey. This paradoxical scenario often highlights the complexities and challenges homeowners face during such crises.

Conclusion

While it can be discouraging to continue making mortgage payments on a condemned property, it is generally your responsibility to fulfill this obligation unless you are willing to walk away and allow the bank to foreclose and sell the property. This decision should be made with careful consideration of your financial situation, legal rights, and potential long-term consequences. Seeking professional advice can provide you with the clarity and support you need to make the best possible decisions in this challenging situation.