Mortgage - what happens to the house if I die

[Lessthenhe]

What will happen to our house if I passed away?

Id just like to understand what will happen to our house if I were to pass away. I own the house with my wife and we have a £360k mortgage on a £600k house.

I cannot qualify for life insurance due to pre-existing conditions.

Would the bank demand immediate repayment of the outstanding mortgage? My wife is a lower earner so wouldn't be able to qualify for a mortgage.

I cannot qualify for life insurance due to pre-existing conditions. However, I have a death in service benefit with my employer.

Please no comments about that is a massive mortgage. I regret this but we have a 5 year fix that has recently started.

Would the mortgage not just roll onto the standard variable rate, presuming the survivor couldn't meet the affordability checks for a new fix?

Either way, if she is unable to make the repayments, whether interest-only or not, she would have to sell the house and downsize.

Well it’s up to your wife.

She either uses the death in service money to pay off the mortgage, she uses savings/income to pay a lump sum off it, or she chooses to sell it.

What exactly are you worried about?

Hang on, how do you know? Are you the wife?

It's true.

I took out a mortgage in September and have no insurance policy concerning repayment.
My mortgage broker suggested a few products that would cover my mortgage payments if I became ill/out of work, and would only kick in after quite long amounts of time. They seemed (to me anyway) quite expensive, so I dithered. The broker said he'd get back to me with some quotes, and never did. I didn't bother chasing it.

I take the view that if I drop dead tomorrow, and my house has to be sold (I have no dependents), who cares? I certainly won't, because I'll be dead.

You just need a bit of savings buffer to carry through payments for a few months and to make sure she knows where all the documents are. This sounds like a non-big deal. Given your lack of life insurance, making sure you are saving to cover costs after you are gone sounds like a savvy move anyway.

Don't assume Death in Service will be a fail-proof solution. It's fine provided you don't get made redundant or get fired.

Could your existing condition potentially cause you to be ill (off work) for an extended period? You can be dismissed if you have a persistent or long-term illness that makes it impossible for you to do your job.

I think she should be okay as the death in service payment is paid out directly fairly soon after your death and well before probate is sorted. Your wife could then use it to pay off the mortgage.

If my hubby who had, had heart attacks could get cover I would be surprised you couldn't, I will admit his only covered the mortgage but he got cover, have you tried several providers?

Are you sure you don’t qualify? I have pre existing condition but i did find a company that would cover the mortgage only, I pay nearly 3x what my husband pays but it gives me piece of mind. I struggle with income protection (I can’t find that affordable anywhere)

Just to be clear, in the sad event you were to die, no, the bank would not immediately tell your wife to clear the entire mortgage in one lump sum.

It would continue as normal until (a) she decided to pay it off with the death in service (b) she ran out of money to make the monthly payments or (c) the mortgage term came to an end.

Banks do not re-assess affordability off their own backs when the circumstances of the borrower change. Your wife is a borrower as she is a joint party to the mortgage and joint owner of the house.

Sometimes when a fix runs out this will prompt the borrower to seek to remortgage. At that point affordability will be re-assessed.

It's true and has been true for a long time. When we bought our flat the mortgage was in DH's name only and while he could have got life insurance the cost was prohibitive. He was never questioned about having life insurance and was approved for the mortgage without a problem.

Exactly. I bet some brokers like to give the false impression that life insurance is required because they get commission on selling the policies. Unethical but would be easy to fudge it and leave potential borrower with wrong impression.

You can get life insurance but have your pre existing condition exempt. So if you get hit by a bus it would be covered.

If your wife can pay off the mortgage with the death in service then the logical thing for her to do would be to pay off all or most of the mortgage then she would own the house and it's hers.

I stand corrected. I haven't applied for a mortgage for a very long time.

You don’t need life insurance to get a mortgage. I also cannot get it due to conditions. It doesn’t mean you can’t buy a house.
i am in a similar position, I thought life insurance would be expensive, but possible. They offered me a policy for £900 a month 😂 which wild only cover a fraction of the mortgage and expire after 15 years. Pointless.

I always think they would find a way to make it about your pre-existing conditions so they don’t have to pay out. For example, if you got hit by a bus, then had a long hospital stay and eventually died of sepsis for instance, they would say that was down to your pre-existing conditions.

There's £240k of equity in the house, so plenty to cover the bank/ BS if OP dies so LI probably not required. I've had three mortgages and never had life insurance.

I’m pretty sure this is what would happen.
You die.
Your wife is entitled to your Death In Service payment, which is enough to cover the mortgage. She has paperwork which states the figure, and it is clear it is enough to pay off the remaining mortgage.
It takes a bit of time to get the DiS payment. The bank start hassling. Your wife shows them the paperwork, explains the arrears will be covered in due course, and asks for a mortgage holiday. The bank will likely agree, and if they want a bit of money, your wife can use savings to keep them happy.

There’s no way they’d repossess a house (with all the legal time and costs involved) if the current owner had the money available soon.

OP if you are very ill, there may be things you can do now to ensure all the DiS process is ready to go as soon as necessary.

The rules changed and forced the bank to accept non preferred insurance Assurance providers as some banks were earning comission from linked providers.

and if a householder is in financial difficulty they may stop paying for any type of insurance to save money
Ditto when one of the people do a runner on the loan as well as the relationship.

So the bank know that insurance policy at the point of a 5 -35 year contract is only good for the first months policy payment.

It did used to be required, at least by some lenders, in the 70's. At one stage, they could even insist, as a requirement of the mortgage, that the life insurance should be with them or with their nominated insurer.

If there's a prospect of you dying in the next couple of years, OP, I'd suggest you and your wife try to save up at least six months-worth of bills, including mortgage. She won't necessarily need it but it will offer you both peace of mind.

Your Death in Service payment should be enough to pay the mortgage for some years and she'll have a share of your pension, too. She's likely to be better off than many people in her situation.

Thanks.

death in service would cover the mortgage but that’s going on the assumption that you drop dead while still employed. If you were on long term sick and let go or just generally made redundant or fired and then died, you’d get nothing.

This happened to us, dh had no insurance due to pre existing conditions and then died almost 2 years to the day of being made redundant so no death in service anyway.

I got £2.5k and £100 a month for 18m. I got a 3 month payment holiday off NatWest that they did not want to give me I had to literally plead (I’d always over paid each month too so it really stuck in my throat)

So many of you have no idea about life insurance when you’ve got a complex medical history it you still comment like the op hasn’t really tried “Have you tried a broker” life insurance is for people who haven’t got a huge chance of dying suddenly. Their algorithms know you’re not going to have a long life.

Dh was on two mortgages during his life time, both without insurance.

@Lessthenhe Do you have a pension in place? If you have, that would also transfer to your wife in the event of your death, providing additional cover.