Illness and mortgage

[INVSTOR]

Just thinking of a friends situation, worst case scenario, and options.

Assuming you are single, have a 50% mortgage, no disability or mortgage insurance and suddenly became really ill/disabled to the point you could no longer work, what would your options be?

Property is not liquid, it would take a while to access super in hardship, or Centrelink (I'd imagine), so you would quickly have mounting bills.

It just got me thinking....surely others would know of people being in a similar situation. Is there help/options/do's and don'ts. I know there is often support/funding for some common situations but I'm sure there's a lot I don't know!

 

[Gremlin]

Why would you choose to have a decent sized mortgage without appropriate insurances for protection?

 

[INVSTOR]

Why would you choose to have a decent sized mortgage without appropriate insurances for protection?

I guess no-one expects to get ill in their 40's etc, hindsight.

 

[INVSTOR]

I think investors would usually think that way about insurance, maybe not the average person?

 

[weg]

I guess no-one expects to get ill in their 40's etc, hindsight.

I don't know about this. More like a case of people choosing to stick their head in the sand or simply taking a gamble.

If you're going to make a big financial investment and don't put in any safeguards for this sort of thing, why should others be concerned when it comes to bailing you out?

All it takes is paying a little extra on the mortgage to give yourself that buffer - just paying fortnightly payments translates to an extra months repayment a year, if accumulating savings or paying a bit extra off the mortgage is too hard.

 

[INVSTOR]

I don't know about this. More like a case of people choosing to stick their head in the sand or simply taking a gamble.

If you're going to make a big financial investment and don't put in any safeguards for this sort of thing, why should others be concerned when it comes to bailing you out?

All it takes is paying a little extra on the mortgage to give yourself that buffer - just paying fortnightly payments translates to an extra months repayment a year, if accumulating savings or paying a bit extra off the mortgage is too hard.

She has put in extra repayments, was thinkIng contacting the bank wouldn't be the first contact if you were no longer employable. Surely if you paid 5 yrs extra they wouldn't say, don't worry about it for 5 years?

 

[weg]

She has put in extra repayments, was think

If she's paid fortnightly she probably is ahead.

Seeing the bank as soon as she knows she's going to have problems with debt/repayments (that applies with anyone she owes money to) is always preferred if wanting to negotiate a modified payment plan, than to spring it on them with a late or no payment.

 

[weg]

Surely if you paid 5 yrs extra they wouldn't say, don't worry about it for 5 years?

I think 5 years extra would buy you a lot of extra time if you were in strife.

Someone here should know if they give you the whole 5 years.

 

[devank]

Can't he/she take out LOC before stop working?

What happened to the 'reverse mortgage' stuff??

 

[weg]

Just did some reading.

The home loan needs to have a 'redraw facility' attached to it, then you can withdraw the entire amount that you're ahead with.

Usually only available with variable home loans.

 

[INVSTOR]

Can't he/she take out LOC before stop working?

What happened to the 'reverse mortgage' stuff??

I think that vanished with the credit crunch.

It's not an urgent financial situation yet, but worth considering options now rather than last minute. The health/lifestyle/changes/care/emotional part is a lot to take in, so I'm thinking it would be good to have a bit of a financial plan sorted.

 

[Terry_w]

Just thinking of a friends situation, worst case scenario, and options.

Assuming you are single, have a 50% mortgage, no disability or mortgage insurance and suddenly became really ill/disabled to the point you could no longer work, what would your options be?

Property is not liquid, it would take a while to access super in hardship, or Centrelink (I'd imagine), so you would quickly have mounting bills.

It just got me thinking....surely others would know of people being in a similar situation. Is there help/options/do's and don'ts. I know there is often support/funding for some common situations but I'm sure there's a lot I don't know!

You could apply for a repayment holiday - for a few months.
You would then have to sell the house probably,
Depending on how serious the illness is you may be able to get access to your super.

I seen this happen to someone. No insurance, no super (as self employed and never paid any) and already had 60 owing on credit cards. He had to sell his 2 investment properties.
He then died owing more to the bank than the property was worth.

 

[INVSTOR]

Just did some reading.

The home loan needs to have a 'redraw facility' attached to it, then you can withdraw the entire amount that you're ahead with.

Usually only available with variable home loans.

Thanks, I will check with her. I think she had a variable portion that she may have paid out completely, hopefully not.

 

[Richard Feynman]

I think 5 years extra would buy you a lot of extra time if you were in strife.

Someone here should know if they give you the whole 5 years.

In my case, the 5 years would buy 5 years.

I queried CBA while I was on a fixed loan which I'd made a stack of extra repayments on. No redraw facility at all, but I was way ahead.

They informed me that, were I to start missing payments, there'd be no problems until I'd eaten through the entire surplus created by the extra repayments. Even then, there'd be some leniency.

If there's redraw as weg mentioned, it'd simply be a matter of pulling every cent out, and using that to maintain payments, which would buy time.

Keep in mind, this was CBA, and a single phone call. I'm just relaying what I was told.

 

[china]

He then died owing more to the bank than the property was worth.

Thats a great way to go. Assuming one has no dependants, then passing away with massive debts must mean that the person has maximised his finances in life.

 

[Terry_w]

Thats a great way to go. Assuming one has no dependants, then passing away with massive debts must mean that the person has maximised his finances in life.

Yes, and life insurance doesn't go to creditors either.

If you can manage it you could borrow up to 90% of all investment properties, depend the money, and die leaving a large CGT bill.

 

[china]

On the subject of insurances for those with mortgages, my thoughts.

About five years ago, as a self employed small business owner, I was thinking of getting some form of income protection insurance.

However, as is my style, I procrastinated. Now, although I am heading into my 40s, I am not sure that I need it. I have no debts and no dependents.

I have two unencumbered properties - one resi and one commercial -proabably worth 950k. These properties have zero yield. I am the tenant of my own commercial property. Then there is 160k of super in first state super. And about 1.7 mil cash plus 50k in blue chip shares.

Assuming that I have a terminal illness, then these assets should be enough to tide me through to the end.

The more tricky situation is if I am disabled tomorrow and cannot work forever, will the above be sufficient to see me through? At some stage, I must qualify for government assistance?

 

[Terry_w]

On the subject of insurances for those with mortgages, my thoughts.

About five years ago, as a self employed small business owner, I was thinking of getting some form of income protection insurance.

However, as is my style, I procrastinated. Now, although I am heading into my 40s, I am not sure that I need it. I have no debts and no dependents.

I have two unencumbered properties - one resi and one commercial -proabably worth 950k. These properties have zero yield. I am the tenant of my own commercial property. Then there is 160k of super in first state super. And about 1.7 mil cash plus 50k in blue chip shares.

Assuming that I have a terminal illness, then these assets should be enough to tide me through to the end.

The more tricky situation is if I am disabled tomorrow and cannot work forever, will the above be sufficient to see me through? At some stage, I must qualify for government assistance?

That should be plenty. More than 98% of the population I would think.

If you get sick or become disabled 'you' could start drawing down on the cash and then start selling things as need be. You can even access your super if the your illness is serious enough.

Better consider appointing enduring guardian and attorney.

 

[INVSTOR]

If you get sick or become disabled 'you' could start drawing down on the cash and then start selling things as need be. You can even access your super if the your illness is serious enough.

Better consider appointing enduring guardian and attorney.

Thanks, Yes, I think she should do above next week.
She became ill about a week ago. Been getting tests all week. Will have diagnosis within a couple of weeks. It was expected symptoms would improve, but they are getting worse, so not sure if a sign of future. There is a chance that right medication could help. At this stage its unknown though. I guess in 3-6 months it will become more clear. She's in a reasonably new job so only about a week or two sick leave left. I think if she could lower repayments for 6 - 12 months that would help heaps to work out if she could return to any type of work, if she needs full time care, special facilities, able to drive, etc. I think that's one of the hardest things at the moment, not knowing the future, lower repayments should take some pressure off for the carers/family and mounting medical bills.

 

[weg]

What illness do they suspect?