Mortgage settlement for critical illness

Hi

I recently claimed for and received payment for a terminal illness benefit on my mortgage protection policy. The bank were paid directly by my assurers to the Bank of Scotland to the value of €125,000. This is half of the value of the policy. The balance paid on my death.

I received in the post today, a letter from the Bank of Scotland, acknowledging receipt of payment and stating that my monthly payment is now been reduced to €900 per month. A reduction of €600 per month.

Maybe I am being thick here, but my question is why am I required to continue pay the €900, as stipulated in their letter? My argument is this - If the money was paid directly to me and I continue to honour the mortgage repayments at the €1500 per month as prescribed, the €125k would be sufficient funds to cover the next 7 years. Terminal illness benefit is only paid to people who are expected not to survive longer than a year and designed to help remove the financial headaches from a patient and their family in the final days. This doesn't seem to be the case with Bank of Scotland. If I refuse to pay the revised payments, what are the implications? Would it be considered a mortgage default? What impact will there be on my family after my demise? Any advise, keenly sort . Regards

Hi Boris

I suspect that you are a victim of BoSI's inefficiency. Their system is probably not adapted to handle this sort of issue, which I would imagine would be rare enough.

Just write to them explainining what you have written here and tell them to stop the direct debit and to treat the payment as advance payments of your monthly payment.

You or your family will not be affected. They will not seek to repossess the home. After your demise, the proceeds of the policy will be paid to Bank of Scotland and your estate will be left with a house. If the proceeds are sufficient to repay the mortgage in full, then the estate will have a house mortgage-free. If the proceeds are in excess of the house value, your estate will get the surplus.

If you stop paying completely, interest will continue to accrue on the reduced mortgage so it's possible that the proceeds will not be sufficient to pay off the mortgage in full.

Keep your executor fully informed so that they have all the correspondence. There is a small chance that BoSI will start legal proceedings and will bill you or your estate for legal fees.