If you die with a mortgage and no life insurance...

itsthenoise

Just an inquiry but can anyone tell me please what happens if a parent dies with a mortgage [ interest only ] and no life insurance?

Does the property and mortgage go to the children?

... and they continue to pay until the mortgage term is finished?

somethingcorporate

The estate will need to settle the debt as the mortgage cannot be transferred.

This likely means the house will be sold.

Thrugelmir

You would need to arrange a mortgage in your own right.

The executors of the Estate are duty bound to settle the debts.

JQ.

If the parent is of working age, have you checked their pension policy. I don't have a specific life insurance policy but if I die now whilst still paying into my pension my estate would get quite a sunbstantial payout, significantly more than the value of my house and calculated as a multiplier of my wage at the time of death.

kingstreet

Death In Service cover doesn't go into the estate of the deceased. As it's written under irrevocable trust it is paid, at the Trustees discretion, to the beneficiary named in the latest nomination by the member.

It is certain that the estate must settle the mortgage by selling the property, or by the beneficiar(y/ies) repaying the mortgage by cash, or by raising a new mortgage to repay the old one..

itsthenoise

Thank you people for your advice.

Goldiegirl

It is also possible for the beneficiaries to take over the existing mortgage, by way of Transfer of Equity

Let_Us_See

If parent hasn't basic life insurance then probably no pension as well. The obvious response is to request a quote for level term cover to repay the mortgage in event of death. I appreciate the cover could be high due to being very much driven by age, but it costs nothing to obtain a quote!

holly_hobby

Re DIS - the trustees will ordinarilly (but not always if there is dispute) pay the benefits (typically 4 x salary), to those nominated within the "expression of wish" form you completed (or should have), upon entry into the scheme.

If you have DIS, and haven't completed an EOW form, then request one from your HR dept/scheme administrators, and duly complete.

As the benefits are written under trust, they are paid directly to the the beneficary, and effectively bypass the estate, meaning that they don't need probate to have completed before having access to the monies to repay the os mortgage (if that is the intention of your beneficary).

The danger upon relying upon DIS benefits to protect your motgage, is that if scheme rules change OR you leave your position, your current DIS benefits will obv be lost, and if any replacement scheme provision is lower (ie if you have lower salary for example), then you will need to source a top up plan, which may be cost prohibitive at the time in life it is reqd.

Furthermore, DIS, is essentially to replecate your loss of salary for up to 4 yrs, for provision to your beneficiaries/dependants - therefore it isn't always a wise move to use it as a mortgage protection plan, but it isn't prohibited do to do so !!

There may be provision to transfer the mge (subject to status) under the lenders own lending mandate, but if your spouse/partner hasnt the income to support the mge (and there is no sufficient capital or death benefits to redeem the os balance) - then really you are potentially leaving them in the position of having to sell the property and your childrens home, and finding themselves and the little ones somewhere else to live (further stress and upheaval for you partner and little ones at what will already be a very distressing time).

If you haven't life provision due to affordabiity, take a hard look at your outgoings, and consider cutting back on a takeaway or 2 a month, in order to afford what will be the best legacy you could leave your loved ones .... a permanent home over their head.

Of course, in an ideal world, I would also like you to consider the addition of income and critical illness policies to your protection portfolio - but one step at a time.

An IFA will provide a full review of your protection requirements, and advise recommended levels of cover and policies to deal with any unresovled exposure.

Hope this helps

Holly x

Let_Us_See

Why is DIS being discussed within this thread. In the initial post there is no specific mention of employment let alone any DIS benefit. So why bang on about DIS?

getmore4less

itsthenoise wrote: »

Just an inquiry but can anyone tell me please what happens if a parent dies with a mortgage [ interest only ] and no life insurance?

Does the property and mortgage go to the children?

... and they continue to pay until the mortgage term is finished?

Asuming no joint ownership since that is not he question.

The mortgage is a secured debt and takes top priority(even above funeral expences which is second) upto the value of the asset.

The debt and property become part of the estate.

options
pay off the debt using other assets.
get the loan transfered to another person along with the property(usualy benifitiaries).
The benifitiaries pay of the debt(effectifly this is paying for the bit that does not belong to them)

sell and pay off the debt, if the asset does not meet the debt then the surplus joins the regular unsecured creditors(5th in order) for a share of the rest of the estate.