Is it ok to get rid of mortgage protection policy?

CharlieMac said:

You probably do have a mortgage protection policy in place, I don't think a bank will give you a mortgage without one. So if you die that mortgage will be cleared and the house could pass to your siblings

Click to expand...

I was told my my solicitor that if you get rid of the mortgage protection, there is nothing the bank can actually do about it.

Towger said:

there is nothing the bank can actually do about it.

Click to expand...

The Consumer Credit Act 1995 obliges borrowers to take out a life policy (except in limited circumstances) at the point of mortgage drawdown.

There is no legal obligation on the mortgage-holder to maintain the policy after drawdown.

That's interesting. I suppose if you die and there is still money owed the bank are still entitled to be repaid so whoever inherits the house has to repay the debt or the house would be sold to clear the debt or the bank can go after whatever it was secured against?

Seems unwise not to have that mortgage protection. Those in your will might inherit debts. I think mines only €100 a year, but it's a small 80k mortgage.

CharlieMac said:

That's interesting. I suppose if you die and there is still money owed the bank are still entitled to be repaid so whoever inherits the house has to repay the debt or the house would be sold to clear the debt or the bank can go after whatever it was secured against?

Click to expand...

The estate has to pay the debts. But if there isn't sufficient in the estate then the next of kin are not on the hook for it.

When you die, any debts you have must be repaid from your estate before other entitlements are shared out. This is the case whether or not you have made a will. Your creditors can sue your estate for the payment of outstanding debts.
...
If you die and have no estate, then your debts die with you as they cannot be repaid. Your relatives do not have to pay off your debts unless they have provided personal guarantees for those debts or they are named on the credit agreement

Click to expand...

I presume that the mortgage contract requires the borrower to take out and maintain a mortgage protection policy.

In the past, certain lenders took out mortgage protection policy and charged the customer when the customer let their policy lapse. Not sure if any lender still does that.

Brendan Burgess said:

I presume that the mortgage contract requires the borrower to take out and maintain a mortgage protection policy

Click to expand...

I believe that to be the case so letting the cover lapse could be a breach of contract which may or may not cause the lender to act. In many cases such cover is not expensive so it's prudent to just have and keep it in place especially if the borrower has dependents.

Under s 126 of the Consumer Credit Act 1995, the bank is legally obliged to ensure you have mortgage protection in place prior to drawdown. (there are some exceptions, for example where a person can't get insured or if the house is not a PPR).

If you subsequently cancel that protection then it is probably very little the lender can do but it would be incredibly tough on the family left behind if it was ever needed.

Divil all happens if you cancel your mortgage protection policy or let it lapse for whatever reason. Happened regularly back after crash, people couldn't afford it or even house insurance in a lot of cases and there is really nothing the bank is going to do about it.

It's many many years since the bank used to take out a policy itself if one lapsed, that was back in the days of composite payments I think they were called where the mortgage, protection and house insurance all came out as one payment and the insurances were usually with the banks own tied agent or insurance arm if they had one. Block policies rather than individual ones but all changed when those combined payments were outlawed and people could shop around wherever they liked and provide their own policies.

Either way it's extremely unlikely a bank is going to do anything other than write out a couple of letters once they are advised by insurance company that cover no longer in place, in other words you were warned, we did tell you but don't come crying to us when something happens and you have no cover!

In the days of buying a house from the Corpo/CoCo and getting the mortgage from them, they would pay for the house insurance.
The trick was to stop paying the mortgage when it was almost up. The council had to keep paying the house insurance, so the home owner basically got free cover.

Towger said:

In the days of buying a house from the Corpo/CoCo and getting the mortgage from them, they would pay for the house insurance.
The trick was to stop paying the mortgage when it was almost up. The council had to keep paying the house insurance, so the home owner basically got free cover.

Click to expand...

Completely irrelevant to the topic in hand - mortgage protection life insurance.

A Bank would never enforce a mortgage on the back of cancelled mortgage protection so it's all a judgement point on whether your dependents need it. If I was a single person I would cancel in a heartbeat, but with a family its there for a purpose.