Inheriting a Mortgaged Home

davidmcn

LearnerMan1 said:

Is foreclosure seen as a last option by lenders then?

Repossession (we don't call it "foreclosure" on this side of the Atlantic...) is always a last option. It is risky, time-consuming and expensive. If it's taking a long time to sell simply because of the state of the market, the lender is unlikely to be keen to take over and then be lumbered with the ongoing hassle/cost of insurance etc. If the estate appears to be solvent I would expect the lender to sit back and wait.

MWT

davidmcn said:

... and then be lumbered with the ongoing hassle/cost of insurance etc. If the estate appears to be solvent I would expect the lender to sit back and wait.

... and that is a timely reminder to the Executor to ensure the property does remain insured and not assume that the policy the  deceased had is still in force.

Also pay attention to the time limits on the property remaining empty while insured. There are policies available for longer period when not occupied if needed... 

getmore4less

MWT said:

LearnerMan1 said:

So the executor deals with the sale of the property and can decide the selling price and also who sells if for them

All of these comments assume that the deceased was the only party with their name on the deeds though and that the will makes no specific directions as to disposal of the property.

Also keep in mind that the Executor is personally liable for the consequences of their actions so they can't just do what they want, like selling the house to themselves for £1 for example... Extreme but just to make a point.

Indeed because if there are other living legal owners the house falls out of the responsibly of the executor as the asset does not form part of the estate only the value of the deceased share does. 

It can get complicated further if those legal owners are not party to the Mortgage, that is more unusual 

Thrugelmir

LearnerMan1 said:

In terms of reasonable time frames -
Would the lender be prepared to wait a year for a sale for example? What kind of time frame could be negotiated with a lender? Is foreclosure seen as a last option by lenders then?
Thank you

If you could provide some context to your questions would be helpfull. As we can dance all night.........

LearnerMan1

If there is money in a bank account or stocks and shares remaining in the deceased name would these be legally owed to the lender before the house could be sold?

MWT

LearnerMan1 said:

If there is money in a bank account or stocks and shares remaining in the deceased name would these be legally owed to the lender before the house could be sold?

Drifting off-topic for this section and into general legal issues...

You certainly should not distribute any of the individual assets to beneficiaries before you have fully identified and dealt with any liabilities of the estate, so even if you believe the house has positive equity it would be very unwise to distribute anything before concluding the house disposal and hence redeeming the mortgage.

If the Executor were to do otherwise and came up short as a result, they would be personally liable for the difference.

The Executor would be well advised to talk to the beneficiaries before selling of stocks and shares as well, to determine if they would prefer to receive them as a transfer or as cash.

So in short, the bank retains a first charge over the house only, but the estate remains liable for mortgage payments until it is redeemed, and the shortfall if there is negative equity, so the Executor must be prudent in his use and distribution of assets like cash or shares.

Whoever the Executor is, should they be uncertain of their obligations, responsibilities and liabilities they should consider taking professional advise.

Thrugelmir

LearnerMan1 said:

If there is money in a bank account or stocks and shares remaining in the deceased name would these be legally owed to the lender before the house could be sold?

Being an Executor of the estate carries both personal and legal responsibilities. Seek advice if you at all uncertain.