Dying in negative equity with charge and no assets

StressfulTime_

Sorry if this is in the wrong place - let me know if there's somewhere else it should go. I also apologise for how long this is going to be!

My FIL has been diagnosed with a terminal condition and told he has 2-3 months to live. He is currently living in an assisted living on a rental basis with his new wife.
He 'owns' a house that my OH and I live in and which I have been paying the mortgage on for 4 years (I have proof of this). The house has an interest-only mortgage on it with £70k outstanding. To complicate matters a £20k charge was applied to the house in 2013, though it shouldn't have been as there was never enough equity in the house to repay the charge and the mortgage.

FIL also has another ~£20k of unsecured debt. He doesn't have a single asset bar a pension which has been signed over to his new wife. No life or any other type of insurance. There is not an endownment policy in place to repay the mortgage at the end of the interest term.

The house has been left to my OH in the will. We do not have a deposit and both have poor credit ratings (currently paying back £600 (him) and £4000 (me) of debt with defaults on both our files) so will struggle to get any sort of mortgage, however we can afford the repayments. We're both also PhD students but are coming up to the final 6 months of our degrees. We would very much like to keep the house.

The house was valued recently by 2 estate agents and both recommended sending it to auction with the expectation of it making £30k-£40k. The house needs about £60k spending on it to sort it out (it needs to be totally gutted, windows, roof, re-rendering, and some structural work) and fully re-done houses on our road (of similar spec) never make over £100k.

Is there any way we can keep the house? We can afford repayments if the current lender changes it to a repayment mortgage but wouldn't pass a credit check. What happens when you die in this situation with negative equity, no assets, and a charge on the house? Please help .

davidmcn

StressfulTime_ wrote: »

What happens when you die in this situation with negative equity, no assets, and a charge on the house?

Mortgage lender repossesses and gets what they can by selling the house. Otherwise the debts die with the deceased.

ethank

Can I start by saying sorry to hear about your FIL. Sending you positive wishes for something that may be very difficult for you all.

The house - there is a charge on it. He will have had to signed up to that charge or alternatively it was ordered by a court. There is no requirement about there being positive equity.

If/when your father passes away, property becomes part of his estate. Some different actions may take place dependant on whether there is a will, but either way the estate will want to settle the debts of owed before distributing any left over assets. The mortgage will be repaid first and then the charge, then any other debts. Add to this reasonable costs of funeral. It is unlikely the estate has that money to pay.

The lender has no requirement to continue letting you pay the mortgage in the event of your FIL passing away, although could give you a little bit of time, maybe two or three months. This is why people are advised to obtain life assurance.

getmore4less

Based on what you have said.

What's the place likely to be worth after £60k is spent on it.
Is it mortgagable in its current state.

Who is executor named in the will?

This could be a walk away, the house does not sound a viable purchase

Find somewhere else to live.

Consider stop paying the mortgage, you certainly do not want to be pay a £70k mortgage or spending money on it untill all the debts are sorted.

Insolvent estate are not something to get involved in unless confident you know what you are doing (Google)

Why has FIL not gone bankrupt?

AnotherJoe

My commiserations.
You'll have to leave eventually though you may be able to eke out the six months until your degrees come through what with bureaucratic delays.
You aren't going to be able to buy the house since you can afford it and the fact it's been left to you in his will is well meaning but doesn't mean anything.
Be careful getting involved with the will. Probably better not to. Who are the executors? If it's you id relinquish.

foxy-stoat

No you won't be able to keep the house, not sure why you would want to either.

Is his Wife on this mortgage?

The proof that you have been paying the interest on the mortgage is not relevant and you should probably keep that to yourself. Does the lender know that your living in it soley?

If its worth £40,000 on the open market and you NEED to spend £60,000 it doesn't seem worth it even for an investment. If it needs that amount of work then you may not be able to get a mortgage on it so if you wanted to buy it from the Estate then you would need cash. If you have defaults and no deposit then you wont be able to get a mortgage anyway.

Start looking for somewhere else to live, save the mortgage payments for the deposit. When you get the default letters for your FIL just bin them, no point in him seeing them now. Are you paying any rent to your FIL?

Good news is when the house is sold then the negative equity, secured loan and £20,000 of unsecured debt will be gone. He should of stopped paying the unsecured debts a while ago, if he is still paying them then just stop and keep the cash.