Life Mortgage protection on Rental property

Springsteen

Registered User
Messages
34
Hi All,

A quick question to help decide if Mortgage protection is needed on BTL's(Buy to let).

A married couple. Joint ownership of the family home. They have life insurance on the familiy home. They are trying to decide if mortgage protection is needed for the buy to let as the BTL is solely in the husbands name, say for example he dies.

1. Does the debt die with him?
2. What happens the property? Does the bank get it to cover the loan outstanding?
3. Do the bank have any recourse to the family home or his estate?

Best Regards,
S
 
If he dies and no mortgage protection the debt does not die with him and the loan will have to be repaid from his estate or the sale of the property, another possible option the bank might agree to depending on situation would be to transfer the mortgage to widow's name assuming sufficient income to repay or remortgage elsewhere to clear the mortgage if she really wanted to keep the house.
 
An interesting question.

Is the Buy to Let in negative equity?

Is the husband insolvent in his own right?

Let's say that the Buy to Let and the home were in negative equity when the husband dies. The investment property would be sold and the proceeds paid to the lender leaving a mortgage shortfall.

The mortgage protection policy on the home would kick in and pay off the home loan. Would the husband's 50% of the house go into the estate? If it does, it would be sold to pay off the shortfall on the investment property. If it does not go into the estate, and the husband had no other assets, it would be the bank's loss.

Brendan
 
I would be in a similar position with several rental properties, no mortgage protection on any of them and very good ECB trackers and good rental income on all of them. If I died would my partner(not married)/kids be in a worse position. Could my estate keep the properties rented, or would they be forced to sell?
 
You may decide to insure the properties so that in the event of the death of the husband the loan would be paid off. It's a relatively cheap term insurance is all that is required. But if the rents are covering the mortgage/costs/taxes then there is no need.

It is quite simple to put the property into both names I believe. As far as I know it can be done with a simple form from the Land Registry and there are no taxes such as stamp duty etc as it's transfer between spouses.
 
I would be in a similar position with several rental properties, no mortgage protection on any of them and very good ECB trackers and good rental income on all of them. If I died would my partner(not married)/kids be in a worse position. Could my estate keep the properties rented, or would they be forced to sell?

This is a completely different scenario to the original poster. Not married. In this case I could only see the bank insisting on the mortgages being repaid out of sale proceeds, I guess it depends on the bank policy on this on the day and in the given year. The bank would be eager to get rid of the costly trackers.

Have you made a will? You and your partner are strangers in law unless the new civil partnership rules come into play in this area. From a tax point of view it could be costly. You mention 'several' properties. Not only do you need a will, I imagine you might need a good tax planning in case of death accountant.
 
I would be in a similar position with several rental properties, no mortgage protection on any of them and very good ECB trackers and good rental income on all of them. If I died would my partner(not married)/kids be in a worse position. Could my estate keep the properties rented, or would they be forced to sell?

Instead of mortgage protection assigned to the properties, get your partner to take out the policy on your life. She will be the owner of the policy, so it isn't liable to CAT.

I echo Bronte's advice, may sure everything is ok regarding co-habitants. You mentioned kids, so if you are together 2 years, it applies but if one of you was already married, you have to have been living away from the spouse for 4 of the last 5 years. You want to get it all sorted though. The co-habitants laws are new so people don't have experience of it in practice. You don't want to be a test case going through the courts.

steven
www.bluewaterfp.ie
 
Interesting indeed. After further research it seems this rests more comfortably in the legal domain.

" Where there is not enough money in the estate to pay all outstanding bills or debts, those concerning the funeral, administration of the estate and concerning the will take priority, followed by debts that have security (such as housing loans) and lastly unsecured debts (e.g. personal loans) Some debts may be covered by loan protection insurance in the event of death (e.g. credit union loans) "

So, it would seem if the BTL is sold with residual debt outstanding, that residual debt becomes unsecured and jumps to the end of the line for payment out of the deceased's estate.

Would the bank pursue the widow for the shortfall? I'm guessing, it would depend on circumstances and the value of the estate.
 
Interesting indeed. After further research it seems this rests more comfortably in the legal domain.

" Where there is not enough money in the estate to pay all outstanding bills or debts, those concerning the funeral, administration of the estate and concerning the will take priority, followed by debts that have security (such as housing loans) and lastly unsecured debts (e.g. personal loans) Some debts may be covered by loan protection insurance in the event of death (e.g. credit union loans) "

So, it would seem if the BTL is sold with residual debt outstanding, that residual debt becomes unsecured and jumps to the end of the line for payment out of the deceased's estate.

Would the bank pursue the widow for the shortfall? I'm guessing, it would depend on circumstances and the value of the estate.

Damn right they will pursue the widow for the shortfall. KBC went after Fiachra Daly's partner for €17,000, knowing that they had been evicted from their home and he had committed suicide. It was only after a huge amount of bad press that they relented and wrote off the debt.

And that was for a PPR. They won't be so kind for investment properties.


Steven
www.bluewaterfp.ie
 
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