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We frequently make rental property loans where part of the loan funds are to purchase the rental property and a portion are used to make improvements. In these cases where the properties are in special flood hazard areas, I have a question about determining the amount of insurance to require. An appraiser will often establish a value as is and a value with improvements. Assuming the amount of the loan does not come into play (the loan is to purchase several properties also, which are not in special flood hazard areas therefore the loan amount is much higher than the property value) is the bank required per the regulation to increase the amount required on the 1 property due to the increase in property value after the improvements have been made?
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