Terminally Ill and no mortgage protection

Hi All,

This query is for a relation of mine.

Basically, this person has been diagnosed with a serious illness and the outlook is fairly grim. He has a mortgage on his home. He had mortgage protection through the lender.

He was self-employed and obviously when the illness first hit him his income dried up very quickly. The mortgage protection policy lapsed about 18 months ago or so.

The mortgage is in arrears now but the bank are aware of what is happening and have been helpful. The interest will be paid by either the dept of welfare or the local authority from now on anyway. The only concern at the moment is for the well being of the individual concerned but everyone would like a bit more information on how to handle these things. Its a stressful enough time without having to think of the financial implications.

Just looking for a bit of guidance as to how banks handle this type of situation. What is the likely course of events following the death of the home owner?

Any guidance or advice would be appreciated.

Thanks,

Hupourdat

"What is the likely course of events following the death of the home owner? "

Presumably, there is life cover for an amount which covers or exceeds the amount due on the mortgage. If yes, the mortgage is cleared from the proceeds of the policy on his death and the property passes with his estate to his next of kin/beneficiaries.

If there is no life cover, it then depends on whether the house is in negative equity. If no, the house is sold and, hopefully, the proceeds will cover the outstanding mortgage. The balance, if any , passes with his estate to his next of kin/beneficiaries.

If the house is in negative equity, the house is sold and the estate is left with a debt which may or may not be paid from any other assets in the estate. If there are no other assets, then the estate is insolvent and there is nothing for the bank to chase and the debt dies.

mf

Thanks mf1,

Unfortunately, the mortgage protection policy lapsed about 18 months or so ago.
Would it be possible for the family to service the mortgage and hold onto the property if they wished or would the bank insist on a sale?

H

Once the original borrower has deceased the loan cannot continue. The Bank may agree to a re-mortgage in the name of one or more of the relatives but this will be a new loan and may not be approved if the Bank feels that the risk is not acceptable. No harm in talking to the Bank generally on whether this is a runner.

hupourdat said:

Thanks mf1,

Unfortunately, the mortgage protection policy lapsed about 18 months or so ago.
Would it be possible for the family to service the mortgage and hold onto the property if they wished or would the bank insist on a sale?

H

Click to expand...

Check and see if life insurance is also on the mortgage - this if usually insisted upon and is in addition to mortgage protection

Hi mcaul,

Would this life insurance be a seperate product paid for by the mortgage holder? The only policy that was in place was the mortgage protection policy.

Thanks,

H