Debts after death...

missbee20

Hi
My father died last year and has left a messy financial situation. He owned a second property with an outstanding mortgage of £85K which has been repossessed, but will be unlikely to get this value at auction. What happens to the shortfall?

He owned my parents home in his name solely(?!!!) so my mum is desperately trying to get a mortgage at the age of 63 so that she can keep the house, but there is some equity in the property so this counts in my dad's estate I think. He had a load of other card debts too. Looks like he owed more than twice what his estate is worth. So that means my mum getting a higher mortgage than is currently outstanding to cover these debts and not lose the house

I think he must've been given some very poor advice somewhere along the line, as he had known he was terminal for a while. Is there any way he could've got life insurance? would he have been given the mortgage on the property my mum lives in if he had not got life insurance? She had no idea it wasn't in joint names as she had assumed it was when she paid the deposit 4 years ago.
Sorry, all very confusing, but I am struggling to get to grips with it all and the probate arrangements...
Thanks for any advice. Questions to clarify my ramblings are welcomed!

holly_hobby

Firstly, my condolences on the loss of your Father - its a dreadful time especially when there are financial complications to complete before you can find closure. And I will help as much as I can - as will everyone else.

Moving on to your post ....

Any os debts at time of death become part of the liability on the deceased's estate, to be administed by the executor.

You mum is NOT legally liable for the repayment of any single name debts your Father collected i.e credit cards and the like - and effectively if they can not all be repaid from your fathers estate - then they simply may only be written off by the lender, as there is no living individual to pursue.

The mge taken out for 85k may well have had MIG on it (mortgage indemnity premium), obviously depending upon when it was effected - MIG started disappearing from mge lending during the 00's.

MIG was in simple terms an indemnity premium paid by the borrower, for the benefit of the lender (to purchase an indemnity policy from a MIG insurer), and would come into play if the property was repossesed and was sold at a loss. The lender would be compensated by the MIG insurer for their loss. (in some cases the MIG insurer then pursued the borrower - but lets not muddy the waters at this point).

The executor needs to contact the lender to establish IF there is a mig policy in place, and also in respect of BOTH mortgages if life cover or such like was effected as part of the mge terms (the lender in each case would probably have requested and recorded details of the provider at the time of application) - then you can contact the noted Life Companies & they can delve into their records to see if there remains a valid policy in place.

With regards to Mum, there has been a recent thread for mges for over 70s, with some really good advice from someone in the industry - take a peek at that too .. just so you have some info to hand if Mum does need to look at raising funds to "pch" the property.
Here's the link to the above thread ... https://forums.moneysavingexpert.com/discussion/3286930

(I'll pop back if anything else springs to mind .. )

Hope this helps

Holly

missbee20

Thanks Holly,

What a useful start, I really appreciate any advice at the moment. It appears that there's piles of paperwork but it's so difficult to ascertain if there were anything like this in place. I will go through this with my mum so that she contacts the lenders. Would they have a record of all that then? I am sure we had to provide evidence of life insurance etc to our lenders when we bought our house.
I'm off to have a look at the thread you suggested...
Thanks again!
Keep it all coming!

holly_hobby

The lender for repo property will definately know if there is a MIG policy or not.

With regards to Mums home - usually they will ask for details of whom the life cover is with (in the case of repayment) or repayment vehicle (in the case of interest only).

It could also be that Dad may have cancelled the original policy recorded with his mge lender, and effected a replacement - that would only be located by trawlling through his papers I suspect. Or contacting his broker (if he used one on a regular basis).

So a bit of digging is reqd, I've just thought on ... bank statements would reveal any ddms to any life assurance providers - so that may indicate where any policy was held. It would have lapsed (made paid up for wp policies) on his cessation of premiums (i.e on death), and I suspect you would have to explain to the provider the basis of why the death claim has been delayed for 12 mths i.e simple answer being you simply didn't know he held the cover.

Anything else I think of ... I'll pop back

Hope this helps

Holly