mortgage: who pays ?

kronas

hi all, due to a recent death in the family i seek advice, if a homeowner dies (not the situation at the moment) who owns/pays the mortgage/house ?

UK007BullDog

My understanding is that the mortgage payments will be added to the mortgage and who ever inherits the property then gets the choice to take over the mortgage, can remortgage with same lender or another. Fees are involved and the interst will accrue on the mortgage.

If another person is named on the mortgage then that person is responsible for the payments.

silvercar

Often, either through an endowment policy or separately, there is life insurance to pay off the mortgage.

If there is no insurance then the benefactors of the estate could take on the mortgage and keep the house or the house would be sold. Normally interest would continue to run while the estate is being sorted out.

If the mortgage is held jointly then the living person is liable for the whole of the mortgage still.

alexandlee

"who ever inherits the property then gets the choice to take over the mortgage.." said uk007bulldog

Its not automatic - the individual who inherits the house would still have to meet the lenders terms and conditions

homer_j_3

The property upon death will automatically form part of the estate if no other mortgage holders are left. The estate will often be given a little bit of time to sort the affairs out (depends on lender though).

The estate has to pay the debt off - end of.

If there is no life cover in place to repay the debt then you have 2 choices

1 - sell the property
2 - Raise finance to repay the mortgage (if you are the benefactor of the property)

If you go with option 1 then interest will accrue and the estate will have to pay the mortgage (either through interest being added or via monthly repayment)

If you go to option 2 then its just a case of remortgaging.

You cannot simply take over the mortgage as the legal contract was with the deceased person and the lenders rights would be affected. You would have to rearrange the finance in the name of the person who wants the property.

If there is sufficient life insurance then the debt is repaid and the house will be dealt with as part of the estate.

plane_boy2000

When my mother passed on her lender carried on charging interest to the loan, but added it to the outstanding balance, pending the endowment policy paying out. In parellel to this (she left no will) I had to go through probate. When this was all resolved the property was then sold.

localhero

Who repays the mortgage on the house will depend on how it was owned and what the Will says.

If a house is given as a specific gift to X, then unless the Will says otherwise they will receive the house subject to the mortgage. The Mortgage company may accept the new owner in place of the deceased or they may not.

If instead the house is part of the deceased's residuary estate, then all of the liabilities including any outstanding mortgage must be repaid by the executors before the proceeds of the estate are distributed to the beneficiaries.

If the house was co-owned as joint tenants, then it (and the mortgage) will pass automatically to the remaining co-owner(s).

homer_j_3

localhero wrote: »

If a house is given as a specific gift to X, then unless the Will says otherwise they will receive the house subject to the mortgage. The Mortgage company may accept the new owner in place of the deceased or they may not.

Good post, but I thought I would just clarify the above.

The mortgage company accepting this person is subject to full underwriting. On this basis, the person who is gifted the property has to arrange a separate mortgage. They cannot just take over the current mortgage. On this basis, it would be best to seek the best deal rather than go with the lender that has the charge over the property.

kronas

so basically guys this is what happens if i get it right: one property involved!if there is no endowment policy, no other names on the mortgage, no will, then it will go to a family member to be claimed, however the mortgage terms of the deceased persom will cease to exist, any outsanding mortgage cannot be continued ? so its either full pay off or re-mortgage ?if there is a will then it goes to that person, same terms if mortgage lender says ok ???? if another person is named on mortgage repayment responability and ownership turns to him/her continued until end of mortgage repayments is that right ?

dunstonh

so basically guys this is what happens if i get it right: one property involved!if there is no endowment policy, no other names on the mortgage, no will, then it will go to a family member to be claimed

The executor of the estate will place it up for sale (even if there is a life policy to clear the mortgage). A beneficiary could decide to keep it using their part of the estate (or private funds)

if there is a will then it goes to that person, same terms if mortgage lender says ok ???

Only if the will specifically mentions it as an asset. Otherwise it is sold (or bought from a beneficiaries share/private funds).

The mortgage, if one is required, will be treated as a new application as far as affordability/credit score etc is concerned.

if another person is named on mortgage repayment responability and ownership turns to him/her continued until end of mortgage repayments is that right ?

Yes. Which is why life cover is nearly always taken on joint mortgages.

kronas

problem is nothing is setup, life cover was canceled years ago!so the problem being who gets the house, no will, no second mortgage, nothing at the moment is setup.