Cancelling Mortgage Protection

MRBEAVER

A requirement for getting a mortgage is that you take out mortgage protection. However this is purely to benefit the bank if you die. It has no benefit for the person paying the mortgage. How would a govt owned bank react to the cancellation of a mortgage protection policy ( while mortgage payments continue).

antiskeptic

MRBEAVER wrote: »

A requirement for getting a mortgage is that you take out mortgage protection. However this is purely to benefit the bank if you die. It has no benefit for the person paying the mortgage. How would a govt owned bank react to the cancellation of a mortgage protection policy ( while mortgage payments continue).

The mortgage protection policy would also benefit your estate if you died. Which in many cases means your husband/wife and kids.

The bank insist on it before giving you a loan in order that they don't have to get into the messy business of repossessing the houses of people who might very well have lost their main breadwinner.

It doesn't really matter whether you think the policy benefits you or not anyway; the issue is your entering a contract with a lender and agreeing to fulfill your part of the bargain - which includes paying interest on the loan, paying the capital back, insuring the property and taking out a life policy.

Why would you now consider reneging on that contract??


Since the lender has your title deeds, I imagine they could force you to take out a policy by purchasing one in your name and witholding the title deeds until such time as you've paid up what they've have to pay out in your stead. They might not bother shopping around for the best deal for you Check out the small print in any case.

Kinetic^

Are you not legally bound to have life protection to cover your principle private residence?

antiskeptic

Kinetic^ wrote: »

Are you not legally bound to have life protection to cover your principle private residence?

You are - in the sense of having embarked on a contract with the lender to that effect. The OP is wondering what would happen in practice if they breach the terms of that contract.

MRBEAVER

Say there are no dependants to consider. My understanding is that mortgage protection covers any shortfall between outstanding mortgage owed and value of property if sold after death of mortgagee. Say there was unlikely to be any shortfall in that outstanding mortgage owed was significantly less than current Market value of property.

In a time when so many are no longer making repayments including mortgage protection and the state owned banks are about to have another round of interest rate increases, how likely is it that the bank would get aggressive over it, if principle and interest were still being repaid on time.

MRBEAVER

antiskeptic wrote: »

Why would you now consider reneging on it? I imagine they could force you to take out a policy by purchasing one in your name and witholding the title deeds until such time as you've paid up what they've have to pay out in your stead. They might not bother shopping around for the best deal for you Check out the small print in any case.

Because the policy does not benefit me and probably not the bank either. Hadn't thought of that but does it happen in practice. Have any banks purchased mortgage protection policies on behalf of any of the many thousands that are no longer paying them?

antiskeptic

MRBEAVER wrote: »

Because the policy does not benefit me

As an insurance policy, it does benefit you by way of benefitting your estate in the case of your death - as mentioned. Now, if you're not particularily interested in the state of your estate when you die then there is indeed no benefit to you. Rest assured that if you do die without life assurance then any equity you've built up in your home will get shared out generously amongst the lawyers - before your estate get's a sniff of it.


Besides, your benefitting doesn't really figure in the banks thinking when they insist you take out life insurance. It's their benefit they have in mind

.. and probably not the bank either.

Incorrect. The money the bank loaned to you by way of a mortgage is insured against your dying.

They'd be mad not to take out an insurance on you given that folk die all the time. And since it's you doing the dying, it's reasonable enough that they get you to pay for that insurance

Hadn't thought of that but does it happen in practice. Have any banks purchased mortgage protection policies on behalf of any of the many thousands that are no longer paying them?

Who knows.

I don't imagine the banks are doing anything other that totting all penalities and charges that accrue due to mortgage default (which is what the thousands you refer to are doing) to the mortgage account of all those defaulters.

A time might come when some kind of debt forgiveness is ushered in. But if it isn't, those extra charges will have to be paid someday.


You could read the small print and find out whether they have to notify you of any action they take re: penalities. Because if they don't have to then you might find a surprise coming with what you thought was your final mortgage payment.

They might do as they did with me: silently take the life assurance out of your monthly mortgage payment (it was a months missed mortgage payment in my case) and extend the term.

sophia25

There seems to be a lot of confusion regarding Mortgage Protection.MP is a decreasing life policy (in line with expected decrease in outstanding Mortgage) to clear o/s mortgage in event of death. It has nothing to do with difference between loan amount and amount realised in event of a sale. There is a specific insurance for this called Indemnity Bond and was compulsory on mortgages with Loan to value higher than 75%. It's a one off payment and due to competition most lenders paid this themselves in last 10 years. Customers have the option to arrange MP through a group scheme with lender and these payments are charged directly each month to mortgage and therefore they will never be defaulted, as even if not paid they are charged to account and appear as arrears. If a customer arranged their own MP through a Life Policy the insurer will not officially allow policy to cease as it has been assigned to lender. However, if a customer cancels DD, then an insurer will lapse the policy and notify the lender. A lender can not just take out a new MP as it is a life policy and therefore a health questionnaire (and possible medical report/ letter) needs to be completed by the insured. No insurer would issue a MP policy without knowing status of health of customer. Mortgage protection is a legal requirement as it means the mortgage is discharged on death and protects the estate. Even if you have no dependents, in event of death a lender would be obliged to get possession of your property, sell it and return any surplus/ deficit to estate. That is not their business and not what they want to do, hence this policy removes this onus from them. The legislation does allow MP to be waived by customer (dependent on consent of lender) in certain specific circumstances (i) Declined/ unreasonable terms from from insurer (ii) Customer over 50 (iii) property is non principle private residence.

I do think that as a responsible citizen, people would adhere to the terms of loan by maintaining the policy as if they die without policy, they are expecting someone else (who had not signed up for role) to sell their house and clear their o/s debts.

MRBEAVER

Thanks for the information Sophia and Antiskeptic. Still not clear though as to why cancelling mortgage protection might not be an option. Sophias point about info on health means from what I can gather that bank can't unilaterally take out a new policy. And I don't see why estate has to be used up in lawyers fees in event of death without mortgage protection. If my estate was worth say €300k (including PPR worth €270k) and balance of mortgage was €80k, surely estate could pay off mortgage without bank having to become involved in sale of house. Estate would still be worth a bit even if inheritor hadn't "signed up" to repaying mortgage.
And I think that talk of behaving responsibly towards banks given what they have done to us and the country is a bit rich.

Victor

MRBEAVER wrote: »

Thanks for the information Sophia and Antiskeptic. Still not clear though as to why cancelling mortgage protection might not be an option.

Presumably you signed up to paying it.

Sophias point about info on health means from what I can gather that bank can't unilaterally take out a new policy.

Not necessarily so. While they might have a deficit of information, that doesn't necessarily stop them. They might, for example take out an expensive, high risk policy ... at your expense.

And I think that talk of behaving responsibly towards banks given what they have done to us and the country is a bit rich.

An eye for an eye makes the whole world blind. Surely you are better than the bankers?

NinjaTruncs

MRBEAVER wrote: »

Thanks for the information Sophia and Antiskeptic. Still not clear though as to why cancelling mortgage protection might not be an option. Sophias point about info on health means from what I can gather that bank can't unilaterally take out a new policy. And I don't see why estate has to be used up in lawyers fees in event of death without mortgage protection. If my estate was worth say €300k (including PPR worth €270k) and balance of mortgage was €80k, surely estate could pay off mortgage without bank having to become involved in sale of house. Estate would still be worth a bit even if inheritor hadn't "signed up" to repaying mortgage.

In the event of your death the MPP isn't paid into your estate, it is paid to the bank who hold the mortgage, if there is an excess that excess will then be paid into your estate.

tHE vAGGABOND

I changed protection policy recently [got it for MUCH cheaper for a few reasons]

During the change over period I got 3 or 4 letters from my mortgage lender, initially asking what the hell was going on that I cancelled my policy and that was not allowed [etc] - the new guys were a bit slow off the mark [or I cancelled the old/expensive one too quickly].

But they are deffo taking notice if you have it or not.

phormium

There are loads of lapsed life policies all over the country and the banks are doing nothing about it.

Of course it is not ideal and in your situation not the end of the world, more unfortunately a lot of these people have dependants but because of financial situation etc they cannot afford to keep them in place.

Not all banks assign the life policy so may not even know if it is cancelled.

Have never heard of a bank taking out a life policy on behalf of a customer where their own was cancelled, cant imagine any insurance company taking on a risk without any of the medical questions answered. It was common practice some years ago to take out house insurance for the customer if they allowed it lapse and charge it to mortgage, this was easier to do as the house had the valuation, not sure if this even happens anymore.

If your mortgage is small then you should perhaps shop around for new cover, you may get it very cheaply in which case I think you should take it out. However if you can only get it at a high rate then I see why you would consider cancelling it.