It is an unfortunate fact that in most circumstances, your debts won’t die when you do. They will become the burden of your surviving family members to deal with, and without the right strategies in place this can be a particularly troublesome process. With the average mortgage in Australia sitting at $434,000, this is a huge responsibility for your loved ones.
As a general rule, the person who inherits your property will also inherit the mortgage repayments. If the property is owned with a spouse or partner, they will typically assume ownership of the property. If, however, you own the property alone, the debt obligation will fall upon your beneficiary.
It’s important that you’re aware that the bank has the right to request the repayment of the loan in full from your beneficiary. If there are enough other assets in your estate, this may not be a major burden, however if the beneficiary is forced to sell the property, or if there’s not enough to cover the mortgage repayment, this can create MAJOR problems for your loved ones.
Here are my tips for ensuring you’re entering a mortgage with the right strategies in place:
✓ Implement the Right Insurance – Ensure that you have the right amount of term life insurance in place to cover your outstanding debts and mortgage/s.
✓ Prepare as a Guarantor – If you’re considering being a guarantor for a loan for a family member or otherwise, ensure that you have appropriate boundaries in place for the amount you’re willing to guarantee and ensure you have appropriate insurances in place.
✓ Understand Your Mortgage – It’s important that you fully understand your bank or lender’s policy with regard to their options in recalling the debt in the event of your death.
A term life insurance policy can provide you and your loved ones with ‘peace of mind’ in the event of unforeseen circumstances. It provides a lump sum payment to your beneficiaries in the event of your death, which can cover outstanding debts and expenses for your family.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Adviser with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to international and local professionals in Singapore.
Book a complimentary consultation here.