Death of Mortgagor with no arrears

kidneyfan

Hypothetical:
A mortgagor dies with no arrears owing on a property (but the mortgage has not been fully repaid) , the death of the mortgagor is not one of the special terms and conditions which the bank has defined as those in which the mortgage becomes immediately payable. The mortgagor's name is not the title deeds of the property.

Question:

Can the bank prevent other assets being probated if the family want to allow the owner to continue to pay the mortgage?

What is the general rule on this sort of potential liability?

Fred Swanson

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SarahMollie

kidneyfan wrote: »

Hypothetical:
A mortgagor dies with no arrears owing on a property (but the mortgage has not been fully repaid) , the death of the mortgagor is not one of the special terms and conditions which the bank has defined as those in which the mortgage becomes immediately payable. The mortgagor's name is not the title deeds of the property.

Question:

Can the bank prevent other assets being probated if the family want to allow the owner to continue to pay the mortgage?

What is the general rule on this sort of potential liability?

I think all lenders require mortgage protection insurance as a precondition to granting the mortgage.

This means that in the event of the death of the person with the mortgage, the balance is paid by insurance.

Fred Swanson

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Zillah

SarahMollie wrote: »

This means that in the event of the death of the person with the mortgage, the balance is paid by insurance.

So one timely murder and I can get a free house...?

ballsymchugh

SarahMollie wrote: »

I think all lenders require mortgage protection insurance as a precondition to granting the mortgage.

This means that in the event of the death of the person with the mortgage, the balance is paid by insurance.

you can always cancel the insurance after paying it for a few months.

i would presume in the event of a death, the bank account would be frozen, so nothing could be paid until probate is issued??

SarahMollie

Fred Swanson wrote: »

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Well then you're in breach of the terms of the mortgage. I dont know of any lenders where this is not an absolute requirement.

If there is a breach, then I think the lender can call in the loan.

kidneyfan

Fred Swanson wrote: »

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For the purposes of a hypothetical discussion let's say that insurance does not exist and was not required on closing and further let's exclude undue influence arguments.

Fred Swanson

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gordongekko

kidneyfan wrote: »

For the purposes of a hypothetical discussion let's say that insurance does not exist and was not required on closing and further let's exclude undue influence arguments.

Well in a hypothetical discussion how does one have a mortgage but no house?

Fred Swanson

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Gael23

The property would have to be sold.

kidneyfan

gordongekko wrote: »

Well in a hypothetical discussion how does one have a mortgage but no house?

Say if the mortgage was taken out for a child and that child made the payments.

Gael23 wrote: »

The property would have to be sold.

The property on which the outstanding mortgage exists?

Fred Swanson

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kidneyfan

Fred Swanson wrote: »

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Let's say that they are not a minor , let's say that the property was bought for them to live in while at university but after university they got a job in that city and began paying the mortgage and let's say that the mortgage is really long and has been paid for 11 years 1 by the parent and 10 by the child.

Let's say (hypothetically) the family are from Dublin and the property is in some nice place near Galway but it is in negative equity.

Fred Swanson

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kidneyfan

What if the mortgagor's name is not on the deeds of the Galway property?

Sleeper12

It would have to have been a long mortgage cos as far as I remember life insurance / mortgage protection policy were made compulsory by law in the mid 1980s.
I suppose it's possible that they could have let the policy lapse. It's all well and good making someone take out a policy before you lend money but perhaps it's harder to make them keep up the payment once they have the loan

Fred Swanson

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kidneyfan

Fred Swanson wrote: »

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Okay let's say that on purchase life insurance (not mortgage insurance) was in place but this has lapsed.

Fries-With-That

Sleeper12 wrote: »

It would have to have been a long mortgage cos as far as I remember life insurance / mortgage protection policy were made compulsory by law in the mid 1980s.
I suppose it's possible that they could have let the policy lapse. It's all well and good making someone take out a policy before you lend money but perhaps it's harder to make them keep up the payment once they have the loan

Several people have suggested that it is mandatory to have life insurance for a bank to give you a mortgage. That is not true, afaik what was made law in the 80s was that the bank could not refuse you a mortgage because you did not have life insurance.

There are many instances where people cannot get life insurance cover.

House insurance is compulsory to a point in that your bank will insist you have it in place because they have first claim on the property, it is in their interests that you have it insured.

Most lenders or brokers will advise you that they will arrange your insurance for you at very good rates, in fact you would be better off shopping around for independent life insurance. and house insurance.

Lastly banks will try to sell you what is called decreasing life cover which means that as the mortgage is paid off the policy value gets smaller and smaller, people would be better advised to buy term insurance for the same term as the mortgage its a little more expensive but it means that if you take out a mortgage for 250k you are taking out a policy for 250k ( this means if you have 200k paid of the mortgage and you die the bank get 50k from the policy and your heirs get 200k) when the mortgage is paid you can have the option of renewing the policy as a personal policy rather than having it assigned to a mortgage.

All points way off topic OP I think you are saying paddy took out a mortgage on a property for mary, paddy is paying the mortgage but dies, if he has no insurance in place the bank have first charge on the outstanding amount owed, they may want the property to be sold.

Fries-With-That

kidneyfan wrote: »

Okay let's say that on purchase life insurance (not mortgage insurance) was in place but this has lapsed.

If there is life insurance in place it would be up to the family where this money went if the policy is not assigned to the mortgage.

kidneyfan

Fries-With-That wrote: »

All points way off topic OP I think you are saying paddy took out a mortgage on a property for mary, paddy is paying the mortgage but dies, if he has no insurance in place the bank have first charge on the outstanding amount owed, they may want the property to be sold.

If there is a shortfall after sale can this be recouped from the estate (if as well as Mary there is Biddy and Willy and Jack ) if there is a will which said 'sell everything and divide it up' (Paddy's wife Bridgeen died in the '70s of emphysema). And it is Mary paying the mortgage (she works for Galway county council and she's married to Iqbal who is an accountant ; but she's still a Catholic).

This is all hypothetical.

Mrs OBumble

kidneyfan wrote: »

The mortgagor's name is not the title deeds of the property.

Hypothetically speaking, how can this have been allowed to happen?

If the mortagagor does not own the property, how can it have been used to secure the loan in the first place???

Gaillimh1976

kidneyfan wrote: »

What if the mortgagor's name is not on the deeds of the Galway property?

Then how did they get a mortgage in the first place ??


Edit - beaten to it - great minds think alike !!!!

kidneyfan

Mrs OBumble wrote: »

Hypothetically speaking, how can this have been allowed to happen?

If the mortagagor does not own the property, how can it have been used to secure the loan in the first place???

Hypothetically it was the Celtic Tiger and Paddy got the fella that sold the old farm for them to sort it out. More broadly should one not be given a mortgage in this circumstance?

Gaillimh1976

kidneyfan wrote: »

Hypothetically it was the Celtic Tiger and Paddy got the fella that sold the old farm for them to sort it out. More broadly should one not be given a mortgage in this circumstance?

Hypothetically if the name on the deeds is not the person the bank loaned the money to, how were they able to register a Charge on the property ?

And if there is no Charge registered, no need to repay anything, the house belongs to the name on the deeds

Marcusm

kidneyfan wrote: »

Hypothetically it was the Celtic Tiger and Paddy got the fella that sold the old farm for them to sort it out. More broadly should one not be given a mortgage in this circumstance?

Technically the mortgage is the charge on the property to secure the loan. If there is no security, it is simply an unsecured debt of the deceased's estate. Unless that estate has some claim on the property or the property is held in trust, in whole or in part, for the benefit of the deceased or there was an agreement enforceable by the deceased personal representatives to discharge the loan by the owner of the property then I suspect the only recourse the lender has is to the deceased estate and professional indemnity insurance of the transacting solicitor.

kidneyfan

What about the deceased's estate (I wish I hadn't said they were from Dublin so I could talk about the family farm) two cottages in Pimlico total value €400,000 both rented out.
Can the bank demand first claim on the proceeds of these cottages if sold (again no lapse in payment of mortgage).

ForstalDave

kidneyfan wrote: »

Hypothetically it was the Celtic Tiger and Paddy got the fella that sold the old farm for them to sort it out. More broadly should one not be given a mortgage in this circumstance?

Generally speaking you cant use something you don't own as collateral as the bank would have no right to reclaim the property if payments lapsed

Of course the legality of taking out a mortgage in such circumstances is questionable and the bank could try other legal means of securing the property if they believe the owner was involved in a fraudulent mortgage arrangement with the bank

Fries-With-That

kidneyfan wrote: »

If there is a shortfall after sale can this be recouped from the estate (if as well as Mary there is Biddy and Willy and Jack ) if there is a will which said 'sell everything and divide it up' (Paddy's wife Bridgeen died in the '70s of emphysema). And it is Mary paying the mortgage (she works for Galway county council and she's married to Iqbal who is an accountant ; but she's still a Catholic).

This is all hypothetical.

If the person that got the mortgage on the second property has not got their name on the second property then it appears that the money was not borrowed against the second property which means that the bank must not have loaned the money against the second property in the first place.

I have seen it happen where a person has taken an equity release loan from a bank and used the money to help a family member buy a house, in these instances the money is borrowed against the persons first home and the loan is on this property and had nothing to do with the second property.

In the past several banks were giving out equity release loans =under various guises, these loans were supposed to be for renovations etc I know of one instance where a couple borrowed 121k on a home that the bank had given them 25k to buy 5 years previously.
The couple in question went on several holidays, bought a fancy mobile home beside the sea and bought a fancy new SUV all paid for with the equity release loan.
If either of the couple died the bank had no claim on any of the property (mobile home or SUV) the money was loaned against the original property not the subsequent purchases.

If the situation you are suggesting is not hypothetical I would seriously advise that these people seek proper legal advice as there may be implications for whomever is living in the first home if they were unaware of a second loan on the property.

If it was an equity release loan it would be looked on as a mortgage by the bank and they did not do any checks as to what monies were spent on.

Gael23

kidneyfan wrote: »

The property on which the outstanding mortgage exists?

Yes, the debt would then be cleared and any equity would form part of the deceased persons estate.
I dint think this type of situation could ever arise because you are required to take out life cover with a mortgage

Fred Swanson

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