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On the evening of December 18, Gansu province was hit by a strong earthquake with a magnitude of 6.2, which injured or killed at least 100 people, while more than 1,000 buildings collapsed. According to preliminary estimates, the epicenter of the earthquake could affect millions of residents in Gansu, covering an area of 4,338 square kilometers. Some people will be curious if the house they bought collapsed. Do you have to pay off the mortgage?
Currently, housing prices continue to climb, resulting in many homebuyers having to apply for loans from banks to pay for their home purchases. In today's society, many people work hard all their lives, often with the goal of owning their own car and property in the hope of enjoying a better quality of life. However, in the face of the sudden impact of natural disasters, these material treasures can be wiped out in an instant. Therefore, it is crucial to ensure the safety of your own life.
But after all, earthquakes are unavoidable disasters, and once you lose your property in an earthquake, it seems that it is not a good idea to continue to repay the loan every month. However, the reality may not be what one would like. In fact, even if you lose your property, you still have to repay the loan. This issue can be interpreted from a legal point of view. When taking out a loan, the property is used as collateral as security, but even if the collateral no longer exists, the loan agreement is still valid. The debtor is obligated to pay off the debt until all debts are paid, and this is not directly related to whether the collateral – i.e. the property – is still there.
The property only acts as collateral to ensure the recovery of the loan. If the property is damaged by an earthquake or other irresistible natural disaster, the debt liability between the lender and the bank still exists, even though the property has lost its value. This is supported by the law, as can be found in the Contract Law and the Civil Code, which clearly state that the lender must repay the remaining principal and interest of the loan even if the collateral ceases to exist.
If the dwelling is still alive but the owner has been killed in the disaster. Usually, in this case, it is necessary to check if there is a will-named heir. If there are heirs, they usually assume the responsibility of continuing to repay the loan. In addition, there is the option to auction off the lender's underlying property as a way to prioritize the repayment of bank debts.
There is also a scenario where no one wants to see that everything is gone, the home is gone, and the borrower is unfortunately killed. Usually when such extreme events occur, banks often have no choice but to decide to wipe the loan off their books.
However, there is no need to worry too much, in practice, banks and lending institutions often make adjustments for different situations. For example, after an earthquake strikes and triggers a government disaster response, relevant financial institutions may suspend loan calls and provide affected residents with a deferral of repayments. In addition, Chinese laws and regulations allow those whose homes have been damaged to apply for compensation from insurance companies or appropriate government agencies, and the funds can be used to pay the principal and interest of the mortgage.
Of course, in most cases, natural disaster insurance companies will not make claims, and insurance companies on the market today do not participate in many natural disasters that are not majeure. In most cases, it is the state that compensates the victim, but it is worth noting that it is not how much your house is worth in the local city that the state must compensate you.
In the event of an earthquake, the victims will not only face economic reconstruction, but may also be psychologically stressed. In order to help the affected residents better cope with the difficulties, the government and social groups usually provide a range of support measures, including psychological counselling, legal advice and temporary accommodation arrangements. At the same time, the state will also intervene in the bank, such as not including the delay or interruption of repayment of the affected people in the credit investigation.
If the disaster is severe, the victim suffers physical injuries. Banks may even forgive some of their debts in some cases. Of course, if a disaster occurs, no one wants to see an earthquake happen. In a word, once you borrow a house, you have the obligation to repay the loan in any case.