Mortgage without life insurance

nic82

Is is compulsory to have life insurance (or some form of insurance policy) in place before being accepted for a mortgage? The mortgage company in question is Coventry Building Society if that is relevant.

The situation is that the house was on a joint mortgage between two people. Only five months of mortgage payments were made on the 30 year mortgage before one of the people died (totally unexpected, only in their 20s). They didn't get around to putting life insurance in place.

Due to there being no life insurance (to pay off the mortgage) it has ended up that the house needs to be sold before the mortgage payments go into arrears.

If it is compulsory to have life insurance in place before the mortgage company accepts the mortgage/releases the funds for the house purchase, then is there a potential case for negligence (or something else)? If it is compulsory to have insurance, then shouldn't the building society have asked to see a copy of the insurance certificate before the mortgage goes through?

The mortgage is fixed for three years and due to the house only being bought a few months ago, there is hardly any equity in it. The other person cannot afford to buy another property on their salary so will have to move in with family. When the house is sold, estate agent and solicitors fees will have to be paid, along with the £2400 redemption fee to be released from the mortgage.

Obviously I'm not hoping for the house to be paid off or anything like that, but if there is some kind of wrong action on the part of the Coventry, then I wondered if at least the redemption fee would perhaps be overlooked.

I know that there is also the chance that blame may lie with the two people taking out the mortgage for not arranging insurance. However, I know for a fact that they never told the building society that they had taken out an insurance policy and also that the building society have never written asking to see a copy of the insurance certificate.

I hope I've given enough info for someone to be able to advise on this one. As you can appreciate, I don't want to give out too much information for fear of identifying the deceased or the other person involved.

Thank you.

mkbswimstar

Hi, just read your post very quickly.
At present myself and my partner have applied for a mortgage and its interest only as thats how first direct do them (even though u can up the payment to make it repayment at a later date) and its on the app form that its up to us if we have life and there is no hint of them wanting proof of it. Otherwise im sure they would have got one of their lot to quote us for it anyway! So an interest only mortgage is even more risky as its never going down and they dont want proof of cover.
Yes it should be advised to all customers to take it life insurance out however i dont think its compulsory and it doesnt suit all people to take it out anyway.
What does everyone else think?

silvercar

Also got a coventry BS mortgage.

It is up to individuals to make appropriate arrangements. Not everyone needs or can get life assurance. Some people have funds set aside to pay off a mortgage should that prove necessary. Others have "death-in-service" benefits from their employment so would not need extra cover. Some people have no dependants and couldn't care two hoots if the mortgage isn't paid off if they pass away. Some people have a medical history that would stop them getting cover (at least at a reasonable rate) and so choose to carry the risk.

Not what you want to here but I don't see how you can blame the Coventry BS.

nic82

silvercar wrote:

Not what you want to here but I don't see how you can blame the Coventry BS.

Thank you for you reply silvercar.

I did suspect that would be the case and that it was up to the two people involved to have sorted out the insurance.

I just wanted to ensure that there wasn't a route that could be taken so that the person who now solely owns the house didn't end up out of pocket. However, it seems that there is no way around it.

A lesson to everyone methinks! Even if you think you are invincible, you're not and it's better to be safe than sorry. Much better to have insurance so that your loved ones are protected in case something does happen. (Both the people involved were under 25).

Thank you again.

tonymac_3

Has the person concerned approached the lender to discuss the situation? Most lenders are sympathetic in these sort of circumstances. Could the person pay just interest only for a period? Who has inherited the deceased person's share of the house? I am sure there are other options rather than a forced sale to add to the obvious shock and upset. Can you give a bit more information and I might be able to suggest something else. If you have already considered these options then so be it.

Bernard_Coleslaw

tonymac wrote:

Has the person concerned approached the lender to discuss the situation? Most lenders are sympathetic in these sort of circumstances.

Completely agree. Get on the phone to the lender - in this day and age most lenders will be extremely sympathetic to this state of affairs.

They will want to help you.

BC

Bernard_Coleslaw

nic82 wrote:

A lesson to everyone methinks! Even if you think you are invincible, you're not and it's better to be safe than sorry. Much better to have insurance so that your loved ones are protected in case something does happen. (Both the people involved were under 25).

Thank you again.

It's a really tough way to learn such a lesson, but if this could in some way be sent to every first time buyer who thinks, "It won't happen to me"......

Regards

BC