In the Philippines, when a borrower passes away, the fate of their housing loan becomes a critical concern. Given that mortgages are secured loans supported by collateral, their repayment becomes a priority in such circumstances.
The heirs or successors of the deceased, legally termed as the decedent, are presented with two primary avenues for settling any outstanding mortgage obligations. Firstly, they may utilize assets from the decedent’s estate to cover the remaining balance. Alternatively, they can choose to assume the housing loan, pending approval from the lender.
However, the most advantageous option among these is often the utilization of Mortgage Redemption Insurance (MRI). Depending on the extent of coverage provided by the decedent’s insurance policy, an MRI can potentially eliminate the remaining housing loan balance entirely, alleviating the burden on the successors.
It’s noteworthy that MRI has become a mandatory inclusion in the housing loan application process. Nonetheless, borrowers also have the flexibility to leverage their life insurance or other relevant insurance products to address outstanding costs in the event of their demise.
In the absence of adequate insurance protection, and if the successors are unable to meet the payment obligations, the property faces the ominous risk of foreclosure. This underscores the importance of prudent financial planning and ensuring adequate safeguards are in place to protect one’s assets and loved ones.
