Mortgage arrears will follow you beyond the grave despite your policy
Published 22/01/2014 | 02:30
HOMEOWNERS behind on their mortgage repayments have been warned that their mortgage protection policies will not pay their arrears if they die.
Some 100,000 residential mortgage accounts are in arrears, and if the holder passes away their partner or spouse could be liable for tens of thousands of euro.
Anyone with a mortgage is expected to have mortgage protection insurance in place to pay off the mortgage if they, or their partner, dies.
But a new study from Caledonian Life has found that a large number of the 100,000 homeowner mortgage accounts in arrears are under-insured.
The issue came to light when Priory Hall resident Stephanie Meehan was initially pursued by KBC Bank for arrears on her mortgage.
Her partner Fiachra Daly took his own life. The couple's mortgage protection policy cleared the mortgage, but the payout from the protection policy did not cover the arrears on their mortgage.
Under massive public pressure, KBC finally agreed not to seek the repayment of the €17,000 in arrears from Ms Meehan.
The family had not lived in the property for two years.
Now Caledonian Life's Joe Charles has warned those in arrears that they may be massively exposed if one of the mortgage holders dies.
Some of those who are two years or more behind on their repayment have built up arrears of an average of €37,000, according to Central Bank figures.
Mr Charles said that where the mortgage repayments fall behind, homeowners fall into arrears and their mortgage protection cover also becomes insufficient.
"These homeowners will inevitably find that a substantial proportion of their mortgage debt will remain outstanding should either party die unexpectedly and the mortgage policy pays out," he warned.
He said this would come as a shock to a surviving spouse or partner at a time when they can least afford it.
The standard mortgage protection policy used in Ireland simply does not allow for arrears, particularly at the current scale.
Mr Charles said Caledonian Life's analysis suggests that homeowners in arrears of more than two years could find that they are under-insured by up to 17pc of their mortgage, or an average of €36,000 on a typical outstanding mortgage of €173,000.
The under-insurance issue is less severe for those whose mortgages are six to 12 months in arrears at a typical average of €10,000.
Caledonian Life said those in mortgage arrears should contact their financial broker and assess the gap between the level of cover and their total outstanding mortgage debt. If at all possible, they should seek to increase it by the difference.
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