Probate, Mortgages and Banks

Seany

Afternoon all,

Sadly a relative has recently passed on, leaving us as executors. There is an outstanding mortgage on the property left behind with no life insurance to cover it due to circumstances.

The best for the estate (and the number of cash gifts etc) is to refresh the house, which is a little outdated and tired, and then to sell it.

This was always the plan. However we've just been informed chances are, the bank will take over the sale of the property and sell it quickly to get their money. Can they do this? It will greatly effect the estate, the gifts and the deceaseds wishes.

There isn't enough cash in the estate to pay off the mortgage, maybe half of it.

Wh05apk

Sorry to hear of your loss, I do not know the "correct" answer, and would suggest you contact a solictor asap to confirm your position, rather than take "opinions" from unqualified persons on a public board (however well meaning they may be)

Senior_Paper_Monitor

I agree with Wh05apk but will hopefully be able to give some level of input on this to point you in the right direction .. Key Question: Who are the executors ?

holly_hobby

The executor(s) may approach the lender and submit their request to delay disposal of the property, cite the reasons why (upgrade to achieve a higher market price), and that there is a reason for their benefit to agree this i.e in its current condition the property on sale is estimated to only realise apx 50% of the o/s mge debt. You also have the ongoing monthly mge payments (applicable until redemption) to consider, and how they will be met in the meantime.

The mge lender does not have have to agree to a delayed redemption however if your press on the fact that the aim is to ensure the decds os mge debt is repaid, then they may be more in favour of allowing you some extended time to settle the matter (i.e I wouldn't mention too much that its also to try and have capital left over to satisfy the bequests of the decd).

Even if there is a will, you may still employ a solicitor to assit with probate and issues such as this ... of course there will be a professional fee, which can be offset from the estate before division to beneficiaries.

Hope this helps

Holly

antrobus

Senior_Paper_Monitor wrote: »

I... .. Key Question: Who are the executors ?

Seany wrote: »

....Sadly a relative has recently passed on, leaving us as executors.....

Well, as executors, the property is, or will be yours. Yes, no doubt, the bank can now demand immediate repayment of the mortgage and seek possession of the property if that is not forthcoming but, I assure you, they'd much rather you sold the property than going to all the trouble of doing it themselves.

As executors, what you need to do is go and talk to the bank, and explain to them what your intentions are. I wouldn't rack up any legal costs at this stage until you know what the bank says.

Senior_Paper_Monitor

Ooops, sorry missed that - problem with foruming while doing while doing real work !

As per the two previous replies

Thrugelmir

Seany wrote: »

Can they do this? It will greatly effect the estate, the gifts and the deceaseds wishes.

Separate yourself from being an executor of the estate and beneficiary of the will.

As executor you are legally bound to liquidate the estate and settle any debts. As executor you leave yourself personally liable should problems arise.

magpiecottage

The "mort" bit of "mortgage" means death (like mortal or mortuary). The "gage" bit means "duty" (as in "payment of").

In other words it is payable on death - so yes the lender can insist that the payment is made more or less immediately as part of the settlement of the estate.

However, for the lender to actually take possession of the property and sell it they would need a court order. If the executors are acting in good faith, they are unlikely to do that because FOS would probably take a dim view of it and insist that the additional costs are met by the lender.

As far as tarting it up is concerned, generally home improvements do not recoup the costs involved. Redocorating in neutral colours to make it attractive is cheap.

Remember too that you will have to pay the cost of insuring and maintaining the house whilst it is being sold, that carrying out work on it means delaying putting it on the market and that the market is, to some extent seasonal - this being a better time to sell than the winter. The local authority will also normally waive council tax only for a finite period.

We are currently going through a similar process (without the mortgage). We replaced a broken fence panel, put some paint here and there and put locks on the windows that didn't have any (which I managed to get a job lot for on ebay).

getmore4less

I think you will find as long as the mortgage is paid the lender won't bother much for some time and unlikely to do anything before probate is granted.

As long as there is a will and you are named executors you can start to do stuff.
(before probate)

As has been said executors can be held liable so make sure that you get agreement from the ultimate benifitiaries and that this does not delay too long any bequests that are not dependant on the house sale.

Remember if this refurb takes time uses up cash from the estate and there is a price crash it could cost you and cause family issues.

Also remebber if this refurb really does make a big difference there will be a CGT assesment on the probate value at DOD, the administartor does not get a full CGT allowance.

Might be better to assent the property to multiple benifitiaries and get multiple CGT allowance but that has other issues.

Other options someone buys every one out, does anyone want the house?

What is the value of the estate, if over the nill rate band then IHT/CGT issues need carefull consideration that may need proffessional advice if none of those involved are upto the task.

It may be the will does not allow you to do what you want during administration.

You also have to asses the real value of a refurb it changes the target market, there is something to be said from leave something for the next person.

What if you uncover some lurking problem, could turn into a money pit.

Probate sale sold as seen much cleaner, easy to anwser the queries nearly everything is not known, once you do a refurb you have to answer more questions.

you will have a lot of research to do and unless you are confident with the approach a few £ spent from the estate to get advice might be well spent if there is any conflict.