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.

I work in estate administration. The banks can foreclose and arrange a sale but often will allow the executor time to secure a sale and will often suspend interest for a period too.

I would be very surprised if someone in the street asked me such a question!

Below has sort of been said by PPs, but for avoidance of doubt:

If you have a life-limiting health condition the at some point you are going to have to take sick leave. HR are going to push you hard to take ill health retirement instead, which means resigning. If they think there’s no reasonable prospect of you returning to work, they will dismiss. Even if you remain employed, once you move to zero pay (check your sickness absence policy), you may lose your entitlement to DIS (check pension scheme rules).

The basic position is that the mortgage becomes a charge on your estate, and if you have no other way to repay it your wife would eventually have to sell the house. It may be possible for her to negotiate a reduced repayment over a longer period, which she might be able to meet from her income, any benefits she gets from your pension and so on, eventually repaying the mortgage when she, or her executors sell the house. Depending on what your preexisting illness is and your prognosis, it may be possible to get life insurance at a higher price, or for a smaller amount or shorter period that would provide enough money to reduce the mortgage to something she could afford. Given that the equity in the house after the mortgage is pretty considerable, it is unlikely that the mortgage provider will rush to force anything on anyone, or repossess the house before your death in service benefit runs out.
Nevertheless, it is almost certainly worth talking to a financial adviser, if only for peace of mind.

If the mortgage holder dies the mortgage has to be paid off - if your death in service benefit does not cover it your partner, dependent on income, could apply for a new mortgage or the house will have to be sold.

The wife’s on the mortgage so one mortgage holder is still alive in this scenario.

Hi OP,

firstly, I apologise for all the idiots on here already. I could only read the first 10 comments and I could not read anymore idiotic replies.

Apologies if someone has already said this. You are right and others are wrong, you do not need life insurance to take out a mortgage.

In answer to your question, unfortunately life would carry on as normal with regards to mortgage payments and interest charged. If your wife claimed your death in service benefit she would at least have some funds to keep her going, but inevitably she would probably need to sell the house to gain the equity and buy somewhere smaller.

She might be able to negotiate with the lender for lower payments and a payment plan to help her out in the short term of maybe six months or so. Hopefully your death in service benefit will be enough to allow her to continue living there hassle free while the house sells. Could you ask your employer to enhance your death and service benefit? Even at a small cost? Worth asking. You could also look for a job that offers a higher death in benefit figure.

Look up the Insurance Surgery (insurance brokers) as they do supply insurance policies for people with pre-existing medical conditions. I have used them and they put me with an insurer called the Exeter and I was able to get life assurance after over two dozen companies said it was impossible over five years of looking. The premiums were loaded to about 300%. I managed to get £200,000 life cover for £121 per month for 30 years. You never know, they might be able to help.

Met Life offer up to £250,000 life cover as well as various hospital cover benefits for a very reasonable figure without any medical questionnaire no questions asked. Only snag is the 250,000 is only paid if you die in an accident and not from natural causes. If you die from natural causes it pays just £10,000. There may be products out there suitable for you.

Other than that, I can only think to suggest you remove alcohol from your diet, drink 2-3 litres of water daily, walk 5k a day, resistance train 3 days a week and switch to a plant based diet. Anything to last as long as possible OP.

I’m assuming the mortgage is in joint names. If you died during your 5 year fixed term and if your wife notified the mortgage provider of your death, it is possible that she would not qualify for a mortgage at its current level, however the death in service benefit may reduce it significantly allowing her to have a mortgage. At the end of the 5 years a new mortgage would need to be taken out regardless of the timing of death.
You should note if you have a 5 year fixed deal and you died during that time the responsibility to notify the mortgage lender would rest on her…. If I were in her shoes, I would not immediately notify the mortgage lender, until I had clarity of my new situation, and the likely amount of mortgage I would need to cover. As long as payments are made (maybe savings)…. if your wife could not afford a payment then I would let the mortgage provider know, request time and put the house on the market and downsize.
equally if she feels she must stay in the property then she could take in lodgers.

No it doesn’t. What nonsense

Please OP for the love of god and all that is holy, don’t listen to the nonsense on here. Get yourself some financial advice from a solid, qualified financial planner and go through all the key areas: savings and investments; retirement planning and pensions; protecting against the financial risks; and estate and inheritance tax planning.

and don’t ever again ask for financial advice on a social media board. Half of the posts here are by people who have the faintest idea. I didn’t know whether to laugh or cry

You’re conflating 2 risks here:

one is that you die. If you don’t have dependents you don’t need life assurance

the other is that you get ill (statistically very likely) and struggle to pay the mortgage plus other bills, plus continue to save for your retirement. The horror situation and i see it all the time. The insurance kicks in after 3 months which isn’t exactly a long time to wait. I’ve had 2 clients in the past 6 months with neurological illnesses which are degenerative and now cannot work at all until they die. Neither had insurance. They’re going from solid incomes and a high standard of living to benefits. And at the same time have the trauma of illness really really harrowing situations. No ability to pay for private healthcare or carers or aids. Living in their living rooms because can’t get upstairs. That’s what one has income protection for.

Life insurance is massively expensive for me at 66. I worked in insurance years back. In Europe banks have property linked to mortgage as security. Also LA doesn't pay out for suicide. Don't get me wrong Im fine, just making a point. but that surely makes a point with these mortgage brokers insisting on LA. You can get buildings insurance much cheaper and link that to the mortgage or am I missing something here. Any help guys most welcome. 🙏

Life assurance WOULD be extortionately expensive at 66 as you're waaaay more likely to die! But surely your lender won't have agreed a mortgage term much beyond that anyway?

Point being that if you owe loads still at 66 you have a choice re life assurance premiums or your house being sold after death to repay the loan.

All lenders will require proof of buildings insurance at exchange but there's nothing to stop you cancelling the policy - it's not assigned to the house, neither is LA (hasn't been a requirement for decades). It's all about your attitude to risk. Either way the bank will get their money.

Until OP loses their job - at which point it becomes a massive problem, and perhaps a likely scenario given the uninsurable pre-existing condition which may make them unfit for work.