not renewing mortgage protection, hazardous?

hello all, my brother got left off from his work and is managing to cover his mortgage - never overdue

but decided to not pay the annual mortgage protection fee (as he has not got it) that would have been due one year into his mortgage,

he got a (form type) letter after 6 months, asking for a copy of the policy from head office of his lender (NIB) - they most likley got a letter from mortgage protection company,

do you think the bank might foreclose if he cannot pay his MP policy, he is on one of the tracker mortgages which - I heard on the radio - might be loss making loans for banks at the moment ...

I doub they will foreclose. In fact I am sure they won't.

But somewhere in the terms and conditions, there might be something which allows them to re-set his interest rate if he is in breach of his covenants ( which would include maintaining the insurance). So - given that he is on a tracker, presumably at an attractive rate - failure to pay the insurance might well be a case of penny wise pound foolish.

In a situation like this, in the event of the house owner's death, and where there there is no mortgage protection/life insurance - does the house owner's estate (next of kin) then not become liable for the mortgage?

Taking out a mortgage you sign a binding document called a mortgage loan offer. If one of the conditions of the loan was maintaining adequate life assurance to cover the loan then it is pretty clear cut. No ifs or buts about it.

What mortgage protection are you talking about exactly? Life insurance to cover the mortgage is almost always mandatory, but it's worth shopping around as the price can vary a lot. Mortgage repayment insurance is to cover a number of specific circumstances where the person with the mortgage can't pay.

sadie said:

In a situation like this, in the event of the house owner's death, and where there there is no mortgage protection/life insurance - does the house owner's estate (next of kin) then not become liable for the mortgage?

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No. You cant inherit a debt. This is why the banks require insurance - if the person dies, the bank gets left with a large debt and its only option is to repo the house and sell it.

Money might be tight but if it is life assurance to cover his mortgage in the event of his death, it would be foolish not to have it. However, if he has no dependents then in the unfortunate event of his death, the bank could just sell (if possible) the house. If he has dependents though, it would leave them in a very vunerable situation.
NIB are currently sending out letters to many mortgage holders looking for details of life assurance and house insurance details by the way.

Uh ...csgirl ..of course you can inherit a debt!! If you take the inheritance and it is incumbered then you take the debt with it!!

As for the OP - if you are talking about life insurance for the mortgage so that the mortgage is paid off in the event of your death, well these policies are usually pretty cheap unless you are older or have a medical condition. Failing to pay this premium would be a very false economy.

If you are talking about a mortgage policy that covers mortgage payments in the event of lay off or similar, well IMO most of these are far too expensive and pretty rubbish, so I wouldn't worry about it. I've never come across a lender who required a policy of this nature as a condition but your brother should check his t's and c's on the off chance ..

Kate.

If you don't have the required insurance the bank will take it out for you. (at your expense).

If you take the inheritance and it is incumbered then you take the debt with it!!

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You cant inherit a debt full stop. You can decide on your own free will to take over a debt left behind by someone by coming to an arrangement with whoever is owed the money, but you have no legal obligation to do so.

You are wrong csgirl. If you are left a property in someone's will and it is the subject of a charge, you can choose to accept or refuse the inheritance. You cannot take the house without taking the debt on that house however. The house comes with the incumbrance. You can choose to sell the house and pay the mortgage from the proceeds of sale. You can negotiate with the mortgage holder to see if they will allow you to take over the mortgage. Or the mortgage holder can exercise its security, repossess and sell the house, and pay any balance to the estate.