Jan 20, 2025
The average Los Angeles home is worth about $948,000, according to Zillow. But a lot of homes in the area are worth considerably more. So if you have a $1.5 million property, you're not necessarily living in a mansion. Rather, you may have a fairly modest home that you worked hard to afford.
Unfortunately, thousands of LA homes have burned to the ground in the course of the January Palisades and Eaton wildfires. And if your home is no longer standing, you may be wondering whether you’re still on the hook for the remainder of your mortgage. Unfortunately, you might still have to pay off that loan in its entirety. But some relief may be available to you.
When tragedy strikes
The early 2025 wildfires aren't the first to plague California. Unfortunately, a fair number of residents may have experienced a similar scenario in years prior.
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Generally speaking, you're still financially responsible for paying your mortgage even if your home is destroyed, according to the Consumer Financial Protection Bureau. But that doesn't mean your mortgage lender won't give you a break.
Fannie Mae says homeowners who are impacted by a disaster are eligible for reduced mortgage payments or forbearance, an arrangement that has you pausing mortgage payments for up to 12 months without late fees.
That said, even if your home burns down, you generally still own the land it sat on, according to Frontline Wildfire Defense. If you don't want to rebuild your home on the land it originally sat on because you're concerned about another wildfire or natural disaster, you can sell your land and rebuild elsewhere. But you'll still have to pay off your mortgage balance, even if the proceeds from selling your land don't cover it in full.
Similarly, if you get an insurance payout for your destroyed home, you’re not obligated to rebuild it at all. You could take the money your insurer gives you and use it to purchase a new home, or decide that you never want to own a home again and use the money to cover rental expenses for many years.
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What to do after a disaster-related house fire
If your home burns down in a fire, it's important to know what steps to take. First, contact your insurance company as soon as you reasonably can to let them know what happened and get a claim filed.
It also makes sense to cancel utility service to your home. If it's uninhabitable, you won't be needing the service anyway, so you might as well avoid any meter charges.
Next, figure out if you have "loss of use" coverage as part of your policy and what that coverage entails. Your policy might cover the cost of temporary housing if your home can't be occupied — either because it's severely damaged or because it's gone.
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Be sure to keep records of any financial expenses you incur in the course of being unable to occupy your home. These include hotel bills, meals and other essentials.
If your insurance doesn’t cover all of your displacement costs, government organizations like the Federal Emergency Management Agency (FEMA) may be able to fill in some financial gaps, so it’s worth applying for aid. Be sure to exhaust all of your options by looking into federal, state and non-governmental organizations.
Additionally, be sure to contact your mortgage lender or loan servicer if you need to pause your loan payments. While that relief may be available to you, it won't come automatically.
Your mortgage lender may not know that your home has been destroyed, so you'll need to proactively contact them.
If you're told you can pause or reduce your loan payments, find out exactly how many months of relief you're entitled to. If you’re told you can’t, you may consider speaking to a lawyer about your options.
Also, don't forget that just as you're still responsible for paying your mortgage if your home is destroyed, so too are you on the hook for property taxes. However, you may be eligible for a reprieve there, too. Contact your town or municipal finance office to discuss your options.
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Maurie Backman has been writing professionally for well over a decade. Since becoming a full-time writer, she's produced thousands of articles on topics ranging from Social Security to investing to real estate.
