Mortgage protection not assigned

Virgitwit

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2
Hi. My husband died suddenly a few years ago. Ihave 2 young children. We had mortgage protection insurance, however the lender never took an assignment on the policy and the insurance provider paid the death benefit to me as joint life. I've had to use some of the money for certain expenses and living costs, but I still have a lump sum of around 75% of the loan amount. Am I legally obliged to pay this off? I have a tracker mortgage with approx 17 years left. Thanks for your replies
 

mf1

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4,223
"Am I legally obliged to pay this off? "

Yes. But that's not the question you actually want an answer to. You want to know what would happen if the bank found out.

It was a condition of getting the mortgage that the policy would be assigned.

I am amazed that the funds issued when the policy had not been assigned.

You've chosen not to discharge the mortgage entirely. Presumably you are continuing to discharge the monthly repayments.

So long as you continue to do so, I suspect the bank won't care.

mf
 

cremeegg

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3,026
"Am I legally obliged to pay this off? "

Yes.
Legally obliged in the same way as you are legally obliged to pay tax ? If you don't pay your taxes you can be penalised etc.

or

Legally obliged in the sense that if the bank took you to court they could force you to pay off the mortgage.
 

Virgitwit

New Member
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2
"Am I legally obliged to pay this off? "

Yes. But that's not the question you actually want an answer to. You want to know what would happen if the bank found out.

It was a condition of getting the mortgage that the policy would be assigned.

I am amazed that the funds issued when the policy had not been assigned.

You've chosen not to discharge the mortgage entirely. Presumably you are continuing to discharge the monthly repayments.

So long as you continue to do so, I suspect the bank won't care.

mf
Thanks both for your replies, legally obliged as in do I have to pay off the mortgage with the lump sum or can I just continue to make normal monthly repayments as I have always done and continue to do?[/QUOTE]
 
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Sarenco

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5,590
Why wouldn't you use the proceeds of the policy to pay off the mortgage?

You would save yourself a fortune in the long-term.
 

luckystar

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143
Pay off any loans/credit card debt. Keep €10k aside as savings and put the balance against the mortgage. Otherwise it will fritter away. And enjoy v low mortgage payments, with only 1 income you have to be careful.

And I'm sorry for your loss - very tough with 2 young kids
 

SBarrett

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I am amazed that the funds issued when the policy had not been assigned.

mf
A consultant for one of the life companies told me that during the Celtic Tiger, 80% of their mortgage protection policies were assigned. While banks did look for life cover before granting the mortgage, they didn't care about assigning them. Too busy writing up loans!

Why wouldn't you use the proceeds of the policy to pay off the mortgage?

You would save yourself a fortune in the long-term.
I presume cashflow.


Steven
www.bluewaterfp.ie
 

Bronte

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That's a tough deck of cards you have been dealt Virgitwit.

Poster MF is a solicitor so his advise is very sound. You clearly don't have all the money to pay back the bank. So alerting them now to the fact of the death or the life policy would not be advisable in my opinion. Presumably you are able to meet the mortgage payments so just continue to pay. Possible this money is niggling you, but if the bank are content than put that money away for future expenses or your children's education and best of luck.
 

Bronte

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13,627
"Am I legally obliged to pay this off? "

Yes. But that's not the question you actually want an answer to. You want to know what would happen if the bank found out.

It was a condition of getting the mortgage that the policy would be assigned.

I am amazed that the funds issued when the policy had not been assigned.

You've chosen not to discharge the mortgage entirely. Presumably you are continuing to discharge the monthly repayments.

So long as you continue to do so, I suspect the bank won't care.

mf
Just curious MF, as the policy was not assigned do the bank have the legal right to insist on it being paid to them. Surely the whole point of the assignment is it gives the bank the legal right to get the proceeds of the policy. And without it they don't have that right. Or would the clause in the contract mean the bank could actually do something about it. I suppose they could but they probably wouldn't, not in a case where the mortgage is being paid and it's a widow with children.
 

mf1

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4,223
It was a condition of getting the mortgage that the policy would be assigned.

So, yes, technically, the bank could insist on payment. Whether they would or not is another matter entirely.

mf
 

Monbretia

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1,638
I suppose it all hinges on the loan conditions, my own loan offer just says you have to arrange life cover in the amount of loan etc, nowhere does it mention assigning it, not all banks always assigned back in the heady days as SBarrett has said.
 

NoRegretsCoyote

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792
My experience is that Irish banks do not care once payments are being met. There have enough problems with tens of thousands of non-payers.

Are the mortgage payments feasible on your current income? If they are, then continue to meet them.

Keep a buffer for emergencies, and put what is left over into a pension to obtain the benefit of tax relief.

A tracker is the cheapest money you will ever have. If the house suits your needs then there is no rush to pay it off.
 

SBarrett

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3,129
The conditions of the loan would state that the loan is to be repaid if one of the parties died. The assignment is notice to the life company that the proceeds of the life policy is to be paid to the bank in the event of a claim. The bank will discharge the loan and if there is anything left over, the remainder is returns to the deceased's family.

In this situation, there is a breach of the conditions of the loan but as long as the repayments are being met, the bank won't care or even know the terms were broken. It is highly unlikely too that that they would force the OP to pay over all the money and leave her with no cash and two young kids to feed.
 

misemoi

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123
Op I'm so sorry to hear about the loss of your partner. I hope you are doing ok. In your circumstances I would put as much of the money as I could into a pension plan to maximise tax offsets. Then spend it on anything that will make your life secure eg convert an attic for potential au pair/student/lodger income. 6k into a fund for your children. Remainder into state savings. Continue to pay your mortgage. I hope you have lots of family support.
 

Homelandfan

Registered User
Messages
12
Sorry for your loss Virgitwit, I hope you have good support around you.
It was a condition of getting the mortgage that the policy would be assigned.
I would have thought that the bank should have ensured that the condition was met before funds were drawn down, so it their problem if they didn't, so I wouldn't worry too much about the bank.
Lots of good advice here already. All I would add is this:
If you do put it into a pension make sure you are getting tax relief on income taxed at the higher rate - if you are not paying tax at higher rate then pension is not as attractive.
Also are you "good" with money? If you think you could "blow" all the money over a year or two on expensive holidays etc then maybe it does make more sense to pay off other debts, keep say 15K in savings, then throw the balance at the mortgage to try and clear it early.
Did you take out new life cover for yourself? God forbid anything happened to you, the full mortgage would be cleared.
Finally, have you made a will and organised guardians if anything was to happen to you?

You have probably considered all these things so forgive me if you have ;)
 
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