Dealing with the death of a loved one is difficult enough, and trying to get your head around the financial side of things (like their mortgage) can make things even more complicated.
I’ve published this post to help you understand how the mortgage may be handled following the death of a partner or spouse.
Even so, it’s important to note that there are lots of other things to consider and every situation is different.
If you’re not yet at a stage where you need to address the mortgage, then I’d recommend getting some help with the legal implications first, either from a solicitor or from an organisation like the Citizen’s Advice Bureau.
Who pays for debts after death?When somebody dies, any existing debts (including a mortgage) don’t disappear.
Generally, they must be paid by the executor out of the estate before any savings are passed on to the family or other named beneficiaries named in the will.
If the outstanding balance is too large to be paid off with other assets from the estate, then the house (usually the biggest asset) may need to be sold.
You’re best notifying your loved one’s mortgage lender about their death as soon as possible, especially if you think you are likely to have difficulty meeting the monthly payments.
Who pays the mortgage after death?Typically after the death of a mortgage holder, the monthly payment still needs to be paid.
Lenders are legally allowed to demand the full sum of the mortgage be repaid and hold the right to ‘force’ the sale of a property to reclaim any outstanding balance, although in most cases lenders will be sympathetic and understand that the legal process can take time to sort.
If you want to keep the property in your name, then you will need to run through a standard mortgage assessment to confirm you can afford to take over the mortgage payments in your own right.
If the lender will not approve what is effectively your new mortgage application, then you may need to sell the property if no other insurance or savings are available to repay the debt.
Who pays for the joint mortgage after death?When you and your partner take out a joint mortgage, you are “jointly and severally” liable for keeping up with the repayments.
Following the passing away of your partner or spouse, the home does not automatically get transferred to you regardless of any will if there is currently a mortgage on the property. To transfer the mortgage and the property into a sole name the survivor would need to apply for, and be able to afford the mortgage in their own name. If you are unable to get a new mortgage in your own name the property may need to be sold. Without life insurance, meeting the monthly payments on your own can be difficult. And you may need to face the possibility of selling your home.
If your partner did have a life insurance policy in place, then you may now be entitled to a certain amount of money which might help you clear the mortgage or reduce it to a more affordable level.
The next step…Like I said at the top of this post, every situation is different.
For example, factors such as inheritance tax can play a part in cases where the estate exceeds £325,000.00 - all in all, managing the mortgage after someone dies can be a very complex task.
If you want advice on mortgage options available to you then our advisors can help you over the phone. Here are the numbers: 0800 073 1932 from a landline or 0330 3030 036 from a mobile
Thanks for reading, and I hope this post has helped you in what is a very difficult time.
YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Who’s ‘the executor’?Somebody who is named in a person’s will to handle procedures following their death.
Multiple executors can be named. It’s common for people to choose their partner, eldest children and/or siblings. But solicitors or other suitable people can also be chosen.
What’s ‘the estate’?Basically, ‘the estate’ is a term that covers everything a person owns in their sole name, once they die (savings, property, businesses, investments, vehicles etc.) and sometimes a share in of joint assets.
There are exceptions (like money in joint accounts) and so, again, every situation is different and legal advice may be needed to clarify what is included in your loved one’s estate.