BTL Mortgages and death

D3lphine3

Sorry if this is in the wrong place, but I had no idea where was best

We have a joint BTL business (Me, my step dad and late mother)

We all have our own mortgages, but the business is run as a whole. Me and my step dad have been running the business completely for the last 2 years doing maintenance and ensuring all are rented.

My mum has recently died and now we aren't sure what's going to happen to her part of the business. Some of the mortgages are in her name only and we don't know whether the mortgage companies are going to force us to sell them.

If they did force us to sell they would not get back the full amounts as some of the houses are in negative equity. This would also leave us unable to take out other mortgages ourselves.

Her properties only currently bring in approx 40k per annum with the mortgage repayments being approx 12k per annum.


Would the mortgage companies allow us to continue paying the mortgages? Or would we have to take out our own ones instead?

Thrugelmir

The mortgages will be dealt with as part of winding up your late mothers estate. You will need to refinance them inorder to retain ownership of the property.

You will need to refinance the BTL properties in joint names and pass your late mothers share back to the estate. Those in negative equity will become a liability of the estate.

Your late mothers share of rental income will belong to her estate.

Have you consulted a solicitor yet? Did she leave a will?

Your predicament illustrates why life assurance is so important to have.

D3lphine3

We can't refinance them, We wouldn't get near the amount she has borrowed.

We have spoken to a solicitor and he believes that if we can prove we have been running her side business then we have a good case for taking over the mortgages as is.

She has died without a will as well which has really messed us up.

She committed suicide, so from what we've been told no insurance/assurance would have covered it.

Thrugelmir

How many properties are involved?

When you say a business. How was it structured? Were you paid a wage for looking after your late mothers properties?

silvercar

Sorry for your loss.

Even if you establish that it was you and SDs business, the loans being in your Mum's name will have to be sorted. Even if you made the case for the business being yours, you would need to transfer the mortgages.

That said, it may be that this can be turned to your financial advantage. See an accountant. If the estate is in debt overall then the debts die and are not transferred to you. So if your Mum had no savings then the properties can be handed back to the lenders and sold off. The lenders then get the proceeds of the sale, but have no-one to chase for the shortfall.

Thrugelmir

silvercar wrote: »

That said, it may be that this can be turned to your financial advantage. See an accountant. If the estate is in debt overall then the debts die and are not transferred to you. So if your Mum had no savings then the properties can be handed back to the lenders and sold off. The lenders then get the proceeds of the sale, but have no-one to chase for the shortfall.

Houses in joint ownership with equity would have to be sold. The equity belongs to the estate and would be used to meet the shortfall elsewhere.

D3lphine3

She had 11 mortgaged properties and 4 unmortgaged (under going renovation). 2 of the unmortgaged ones are in joint names.

I have 1 property and my step dad has 7 plus one joint with me and him.

Me and my step dad did all the work on the business and she just kept buying new ones expecting us to do all the work.

She wouldn't pay us a wage because she said it's just what we're meant to do because we're family!

The mortgages were paid using their respective rents and any un-let mortgages were paid using the remaining rents from all the other properties.

All expenses on the business were paid jointly from the business.

She had no savings, she gave it all away! (Approx 40k) One property has approx 50k equity in it. This was her own home.

This is so confusing and stressful at the minute. We have to continue paying the mortgages for a minimum 6 months until we can obtain a grant of administration for the estate anyway.

D3lphine3

Thrugelmir wrote: »

Houses in joint ownership with equity would have to be sold. The equity belongs to the estate and would be used to meet the shortfall elsewhere.

I think that may actually send my step dad in to bankruptcy due to the two joint properties.

He took out the mortgage to buy one and she did the same on the other.

Her one is only worth around 25k due to work being carried out and his is rented out and worth about 75k

Thrugelmir

D3lphine3 wrote: »

This is so confusing and stressful at the minute. We have to continue paying the mortgages for a minimum 6 months until we can obtain a grant of administration for the estate anyway.

Take advice. You don't want to find yourselves personally liable for misadministration of your late mothers estate.

ACG

I agree, life insurance would have stopped all of these problems arising - suicide would have still be covered unless there was a history of mental illness prior to the policies being taken out... but should woulda coulda wont really help.

I think you need to maybe get a mortgage advisor and a solicitor in a meeting together. Sit down with the mortgage advisor, see if there is anyway you can refinance them all - if theyre self supporting then you never know.

Any debts your mother has (ie the mortgages) would have to be cleared from her estate. This would result in properties in her name being sold to pay the debts off - if there isnt enough, then there isnt enough. You or your father in law cant be burdened with someone elses debts.

As for any joint properties, thats a different issue. If they areself supporting then the lender may allow you to transfer it into a sole name or allow the other person (you or your father in law) to be added to the mortgage in place of your mother.

Thrugelmir

ACG wrote: »

I think you need to maybe get a mortgage advisor and a solicitor in a meeting together. Sit down with the mortgage advisor, see if there is anyway you can refinance them all - if theyre self supporting then you never know.

Unless you are financially competent (no insult intended) , I would add an accountant to the above. As the whole structure of what you have needs a thorough review. May be the case that a properly prepared business plan would assist your cause with lenders.

What would you consider your late mothers estate to be worth net of debt. Is inheritance tax a further complication?