re - assign life cover for mortgage

deemy

Hi there, Hope I'm in the right forum ! We are going thru the process of drawing down some money in our mortgage account to extend our house. The bank are looking for us to 're-assign' our life cover policy to them. At present, if either of us dies our life cover policy payment goes to next of kin. If we go ahead with drawing down the extra money and something happens to either of us, the bank will receive the payout first. The guy we are dealing with in our local branch bank said it will make no difference but would I be a bit naive in thinking this is ok?? He said, these days, all life cover associated with new mortgages are assigned to the bank and not the client. Is he right??? Has anyone any advice ? TIA

tenifan

Actually, if one of you die the payout will probably go to the other (not next of kin), and the other will probably use it to pay the mortgage. If both of you die I assume the payment goes to your estate and the bank will get their money anyway.

It makes sense that your bank would prefer to receive the payout directly to clear the mortgage rather than scrambling around trying to get their part of the payout.

I don't think it makes much difference.

phormium

It would be fairly normal for the bank to insist on an assignment of the life policy covering the mortgage. After all that is their safety net if you die and is usually a condition of a loan offer.

deemy

Thanks for replys. Sorry tenifan, by next of kin I ment whichever one of us does not die. At present if either of us dies, it goes to whos alive and if we both die it goes to our kids. We have our mortgage with 10yrs and nvr had to do this when we took it out. I know different climate and all and I have no problem with the bank getting their share as its their money but the paper we have to sign is about 10pages long and tbh its like double dutch to me. Plus our cover is for approx €20,000 more than we owe the bank, which was money which we hoped would tide over the person left for a bit. What would happen to this, I wonder would they hand it over as soon as they got the cheque from insurance ? Also we have a tracker mortgage and am just afraid , unknowingly to us, becasuse we didnt read/understand the small print we will sign something we shouldnt have. I know the banks cant do something stupid like pull the wool over our eyes but a tracker morgage to us is the difference of us being able to have a house of our own and not affording repayments at all iykwim. I wonder should we just find a few €100 from somewhere and get a solicitor to have a look at it. thanks

coylemj

deemy wrote: »

We have our mortgage with 10yrs and nvr had to do this when we took it out.

Surely you were made to take out a mortgage protection policy (MPP) with the original mortgage?

You seem to think this is a new development because of the 'different climate' as you describe it but banks has insisted on this for years now. The system says that you take out and pay for a mortgage protection policy which covers the outstanding balance so that if either you you die, the life cover (that's what MPP is) pays out sufficient to pay off the mortgage. The alternative for the bank is a nightmare scenario where a widow with children and no income is left in the house and they can't evict her because it would be bad PR.

It looks like the bank now realise in hindsight that they let you away with a mortgage and no MPP cover, that's why they're now insisting that you assign your existing life policy to them. The alternative for you is to take out an a dedicated MPP which covers the mortgage and dies with it i.e. when the mortgage is paid off, the policy dies with it. That way you can keep your existing policy to leave sufficient money for the survivor if one of you dies.

If you assign the existing policy to the bank, the insurance company will pay the money to the bank if one of you dies, the bank will then deduct sufficient to pay the outstanding balance on the mortgage and the difference will be refunded to the survivor, they will not keep all of the money as you seem to think may happen.

SBarrett

During the Celtic Tigers, the banks usually got people to take out mortgage protection when they bought a house but never bothered actually assigning it against the loan. They were always supposed to do this but were too busy making money off giving out loans to actually do all the paperwork.

If you assign the policy and there is a payout, the bank will only take what is owed to them. The rest goes to your estate. You will be signing a contract with the bank and it should be included in it. Ask the person you are dealing with to highlight this for you (and watch him struggle to find it!).

It isn't something to worry about, assigning life cover is normal and protects the bank and your family if there is a premature death.

Steven

tenifan

SBarrett wrote: »

During the Celtic Tigers, the banks usually got people to take out mortgage protection when they bought a house but never bothered actually assigning it against the loan. They were always supposed to do this but were too busy making money off giving out loans to actually do all the paperwork.

Another reason was PTSB and Irish Life were one company, so at some stage I believe they stopped assigning Irish Life policies to PTSB mortgages. Not really sure if the logic behind it but there ya go.