The pledge deed
In case of death, there is an increased risk for the lender that the loan cannot be repaid. After all, the income of the deceased will be lost, meaning the surviving partner or relatives won’t be able to meet their obligations. A (forced) sale of the property will not always suffice. For this reason, lenders require all amounts borrowed over 80 percent of the market value of the property to be covered by a life insurance. For a loan with Nationale Hypotheek Garantie (National Mortgage Guarantee), this is always required above 80 percent. In the event of death, the payment of the life insurance will be pledged to the lender.
Aim of a pledge deed
A pledge deed is often part of the mortgage quotation. With the property deed, the insurance cannot be changed without the consent of the lender. Furthermore, the pledge ensures that not the survivors, but the lender receives the insurance benefit, which is used to pay off the loan. This prevents the benefit from being used in any other way by beneficiaries or next of kin.
The specific details of the pledge and inheritance may vary by situation. Please contact a notary or financial planner for advice on what would be the most appropriate actions for your specific situation. Looking for more information about life insurance and what to look for? Please take a look at this article.
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Should I negotiate the best mortgage interest rate?
Prior to 2013, it was worthwhile to negotiate the best mortgage interest rate with a lender when buying a new house. If you did not do this (well enough), then you might have paid too much. Since 2013 you no longer have to negotiate and you are better protected as a consumer. Every lender is obligated to advertise the mortgage interest rate, this is something you cannot and may not negotiate. Some lenders provide a discount, for example, if you open a checking account (with mandatory salary deposit). You do not have to negotiate this either, but rather, see it is an option you can choose to use.