Mortgage Payments after Death

RedSoleShoes

dunstonh wrote: »

No. They end up owning half the property whilst the other person has sole responsibility for the mortgage.

So you are saying that GMS is wrong then? How can one person inherit half a property and another inherit the debt against it?

dunstonh wrote: »

To be honest, I have never known a mortgage adviser not recommend life assurance when it is required. However, the borrowers are free to say no to it.

This is not what happened, hence the reason that a formal complaint is currently being made against the broker.

RedSoleShoes

GMS wrote: »

Did the adviser recommend Life Insurance?

Suitability Letters often mention the need to arrange this.

Life Insurance is relatively easy to arrange, but if done by the applicant direct it is important to make sure the correct cover is arranged.

If they are unsure they can speak to a Mortgage Broker of IFA to arrange it for them.

The suitability letter does not cover the info that it should (being FTB, they did not realise all the things that brokers should be doing) so this is currently under investigation. They are going to sort the insurance themselves. As mentioned, this thread was merely to find out the legal and financial situation with inheritance in their slightly different circumstances.

thorsoak

The solicitor who acted for the brothers should have advised on whether they be tenants in common or joint tenants.

Common sense should have come into the brothers' thinking on this ....

RedSoleShoes

Like I said, I was just trying to find out the inheritance situation. Doesn't seem like anyone actually knows the answer though.

dunstonh

So you are saying that GMS is wrong then? How can one person inherit half a property and another inherit the debt against it?

No. We said the same thing.

The parents would have a share of the property but would not have their credit record soured by non payment of the mortgage. The other party on the mortgage becomes responsible. The parents were never party to the mortgage. However, the charge on the property does mean they could see the value offset by the debt. A joint mortgage is jointly liable for the debt. So, if one dies, the other takes on the debt. The parents cant sell the house without the mortgage being paid but if the mortgage went into arrears, the parents credit record would not be touched.

The solicitor the brothers use are responsible for making them aware of whether joint tenancy or tenants in common is best for them. That assumes they employed a solicitor to provide legal advice (many dont nowadays and only employ the solicitor to handle the conveyancing).

The suitability letter does not cover the info that it should (being FTB, they did not realise all the things that brokers should be doing) so this is currently under investigation.

Theoretically, a mortgage adviser doesnt have to supply or provide advice on insurances. Its just that most do (mainly for earnings reasons as the insurance can pay more than a mortgage).

From a complaint point of view, it would be a pretty easy complaint to reject. All the broker has to say is that the brothers didnt want to use the broker for insurances as they wanted to do it themselves. Unless there is proof otherwise, it would be difficult to argue any different. The balance of probability in unproven cases (i.e. neither side has any proof) is likely to go with the broker I would think.

From a complaint point of view, what do they hope to achieve? The scenario hasnt happened and no financial loss has occurred. So, even if there is wrong doing, there is no financial loss and therefore no redress to be paid.

GMS

What is the problem with delaying the parties to the mortgage arranging Life Insurance?

From my own point of view I always ask if clients wish to discuss insurance as part of the Factfind, and if they choose not to the Suitability Letter states that I recommend this as something the client should address. I have therefore noted the importance of it IN WRITING as well as verbally. Not all brokers would do this but like dunstonh says it is nigh on impossible to have a case against the broker for not having it.

If this whole thread is theoretical then surely insurance can be put in place pretty quickly, unless there is an underlying problem which has not been revealed?

Joint Tenancy or Tenancy in Common will determine what happens to the property if a death were to happen but without provision to repay any outstanding mortgage ultimately the property belongs to the mortgage company.

RedSoleShoes

GMS wrote: »

Joint Tenancy or Tenancy in Common will determine what happens to the property if a death were to happen but without provision to repay any outstanding mortgage ultimately the property belongs to the mortgage company.

So if they are on a joint tenancy (which I believe they are) then the other brother would inherit half or the parents would??

I appreciate the explanations but all I really wanted to know was who would inherit the half if one brother died without a will as generally it would go to surviving parents rather than a sibling. But considering that both brothers are on the mortgage jointly, would this make any difference to inheritance laws?

The insurance will get sorted and the reasons why it hasnt yet are not important as I just wanted to know the situation if one died beforehand.

GMS

Joint tenancy means the half owned by the deceased would automatically pass to the surviving joint owner.

In your hypothetical case this would be the most appropriate way as the surviving sibling would already be liable for the full mortgage amount as each mortgagor is held jointly liable for the payments, meaning if one half didnt pay for whatever reason the other half is obliged to.

Tenancy in Common involves defining exact ownership, often where one half has put in a large deposit. The share of the property would be defined and upon death the share of the deceased would pass to their estate.

If Life Insurance is in place then the mortgage should be cleared upon death with the inherited share being distributed dependent upon Tenancy set up.

Hope this explains it.

dimbo61

When looking at life assurance take out level term cover as there is very little difference in monthly costs compared to decreasing term cover!

Senior_Paper_Monitor

Something that appears to have been overlooked is that if "They are going to sort the insurance themselves." (see #13) there is most unlikley to be any trust structure in place and they may be unaware of 'life on another' structure - the impact of which could be that, at best, release of funds to beneficiary could be delayed and, at worst - no appropriate will(s), could go into the estate and then to parents as next of kin.

I strongly believe that such insurance should be placed via a broker to benefit from professional advice (and the usually free processing of at least the trust component) or separate professional advice (lawyer to apply trust status and review wills - charged for and usually no better than when conducted by a mortage broker or IFA).

I am at a loss why the original broker apparently didn't pursue the insurance issue (perhaps inexperienced / perhaps lazy / perhaps uncooperative clients), particularly with the earning potential for writing insurance, but this shouldn't stop them finding and using another adviser.