Mr. James Ayomide bought a 4 bedroom duplex with a mini flat boys’ quarters for 25million naira in 2006, he took a mortgage of 20million naira and spread his repayment over 10years. He and his family moved in 2 months later after minor renovation, and for years Mr. James and his family enjoyed the comfort of their new home without bordering about landlords’ issues. He monetizes his boys’ quarters and judiciously repay his mortgage monthly. Mr. James suffered heart attack in 2011 because his heart was so weak he died two days after the attack. After the burial of Mr James, mortgage repayment became an issue.
Dying with a mortgage on your house has the potential to cause trouble for your heirs. For example, they might want to keep the house but can’t afford the monthly payments. They could end up deciding to sell it, or your lender might foreclose on the house. In James case his heir wanted to keep the house but can’t afford the monthly payment. And because Mr James refused to take a life insurance or mortgage protection insurance the lender foreclosed on the house. Are you wondering what a life insurance or a mortgage protection insurance is?
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death of an insured person (often the policy holder). Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either regularly or as one lump sum. life insurance offers more flexibility and costs less, your heirs receive the benefit and decide how to use it. If they want to pay off the Mortgage they can, If they don’t want to, they don’t have to.
Mortgage protection insurance is a form of insurance specifically designed to protect a repayment mortgage. If the policy holder were to die while the mortgage life insurance was in force, the policy would pay out a capital sum that will be just sufficient to repay the outstanding mortgage. This kind of insurance makes sense if you know your heir is interested in keeping your house. If only Mr James did any of the above his family would have not lost their house. Be wise.
By Tonia Kaine