Outstanding Loan after Death

Lisa090982

Hi All,

My friend's mum recently died suddenly and unfortunately, has left outstanding a loan she took out a while ago. It's a reasonably large outstanding balance left on the loan (around £12k)

Her mun could afford the loan absolutely fine because she had a decent pension with her former employer which was still coming in after her retirement

My main question is that could the bank force the sale of the house to get the loan payment back from the estate (there will likely be little money left once funeral is paid) or could the fact that my friend has lived in the house for years with her mum mean they couldn't force the sale of the house? 

She could potentially take the loan on and pay it back in installments herself- is that an option?

Linton

I assume Mum owned the house solely. It is up to friend's mum's executor to pay off the debt from the estate before the assets are distributed. If that is only possible by selling the house then the house will have to be sold.

Who inherits the house?  If they dont want it sold they can and should pay off the debt. If it's your friend then perhaps he/she can get a mortgage.

If an executor does not carry out their duties properly in the end they can be held personally responsible.

Bobziz

They'll be a number of options I'd say, and having to sell the house to raise 12k seems very unlikely. Is there a Will and executor, and has her estate valuation been done ? There may be a payout from her pension. 

Brynsam

Lisa090982 said:

Hi All,

My friend's mum recently died suddenly and unfortunately, has left outstanding a loan she took out a while ago. It's a reasonably large outstanding balance left on the loan (around £12k)

Her mun could afford the loan absolutely fine because she had a decent pension with her former employer which was still coming in after her retirement

My main question is that could the bank force the sale of the house to get the loan payment back from the estate (there will likely be little money left once funeral is paid) or could the fact that my friend has lived in the house for years with her mum mean they couldn't force the sale of the house? 

She could potentially take the loan on and pay it back in installments herself- is that an option?

The fact your friend has lived there for years doesn't give her any rights to go on living there, unless she co-owned the house with her mother, which doesn't seem to be the case. The bank could force the sale of the house if there is no other way to repay the loan, but given the state of the housing market, they may well be willing to discuss your friend taking over the loan repayments herself. It's certainly a conversation worth having with the bank.

If the friend's mum started to draw her pension reasonably recently, and it was guaranteed to be payable for a minimum period (typically five years), there may be a lump sum payable equal to the balance of (say) five years-worth of pension. Contact the pension provider to advise them of her death, and ask them for more information about any guarantee period.

relaxtwotribes

Many, many years ago when I worked for a bank, personal loans were written off if the borrower died (a kind of life assurance benefit).  Might be worth asking the bank if this still applies (although I doubt it).

xylophone

Does the daughter inherit the house? The house itself is mortgage free? Is she executor/administrator of the estate?