Mortgage after death

laurab321

I have a dilemma. My partner of 11yrs mother has said that she is drawing up a Will leaving everything to my partner and his sibling. She has also said that she is adding a clause to say that her current boyfriend of 2yrs is to be allowed to continue living in her property for 5yrs following her death before it can be sold. Her property is mortgaged and I am currently assuming that it will still have a mortgage when she dies. I have three questions that my partner is unwilling to discuss for some absurd reason and would really appreciate some advice as this is really worrying me;

1. If a mortgage remains, will my partner and his sibling be liable for payments if they are unable to sell it for 5yrs? What about the person living in it?
2. If unable to sell for 5yrs, does this mean that my partner essentially owns a second property and therefore if we wanted to move in this 5yr timeframe then stamp duty would be extortionate?
3. Does the Will really mean that the boyfriend can stay in the property or will my partner and his sibling be able to demand he leaves so that they can sell?

Thank you

Thrugelmir

The mortgage will need to be discharged in one form or another. 

Technically yes. However they will benefit from any property price increases.

Subject to the mortgage. Yes. Not unreasonable. Though 5 years is an odd period of time. 

MWT

laurab321 said:

1. If a mortgage remains, will my partner and his sibling be liable for payments if they are unable to sell it for 5yrs? What about the person living in it?

The mortgage does not survive the death of the person(s) named on it, but it does become due.

So this would potentially trump the '5 year' clause for the boyfriend and force the sale of the property to take place anyway, if the mortgage cannot be settled by other funds in her estate which would include the proceeds of any life insurance for example.

Your partner and their sibling would have the option to take out a new mortgage if they wished to retain the property, but not the obligation to do so.

That leaves the boyfriend with the right to remain only as long as the house does not have to be sold to pay off the mortgage.

laurab321

Thrugelmir said:

The mortgage will need to be discharged in one form or another. 

Technically yes. However they will benefit from any property price increases.

Subject to the mortgage. Yes. Not unreasonable. Though 5 years is an odd period of time. 

Thank you. I’m a bit shocked that she thinks that this is acceptable to do in the first place. Not something that I would do to my children. 

What if we’re not in a position to pay for another mortgage - or want to take on another mortgage for that matter just to enable someone else to live there.  

I understand that he’d benefit from a price increase whenever the house did sell (that wouldn’t help us if we were unable to buy something in between as we couldn’t afford the stamp duty) but to be honest I don’t want us to own another property - it sounds like he’s essentially not being given a choice going by what she’s going to put in the Will. 

I find 5 yrs an odd period too. A few months perhaps but years??

Flugelhorn

2. You would be able to move house without extra stamp duty providing you were replacing your current main residence with a new main residence

PS is there any life insurance on the mortgage?

p00hsticks

laurab321 said:

Thrugelmir said:

The mortgage will need to be discharged in one form or another. 

Technically yes. However they will benefit from any property price increases.

Subject to the mortgage. Yes. Not unreasonable. Though 5 years is an odd period of time. 

Thank you. I’m a bit shocked that she thinks that this is acceptable to do in the first place. Not something that I would do to my children.

Wouldn't you really ? 

Imagine yourself a few years down the line, where you have two grown up children who are making their own lives away from home, a live in partner in a shared home and a mortgage ?

Are you honestly saying that on the event of your death you would want your (presumably grieving) partner to immediately have the additional worry of being homeless because your will demands that their home is having to be sold from under them and the proceeds go elsewhere? Wouldn't you prefer them to have a few years leeway to come to terms with their loss first ? If they are a long term partner, you may well be  leaving them some money as well which they can use to pay the mortgage in the interim. Clauses to cover who is responsible for maintaining the property and/or paying any outstanding mortgage can be included in the will.

It's very common for marital homes to be left for children but the remaining partner to be allowed to live there for the rest of their lives. In the case of an unmarried long term partner, five years seems a perfectly reasonably timespan to me

MWT

laurab321 said:

What if we’re not in a position to pay for another mortgage - or want to take on another mortgage for that matter just to enable someone else to live there.

Then don't, and the house will have to be sold to pay off the mortgage if it can't be covered by her estate.

Your partner and sibling cannot be obligated to take a new mortgage or otherwise payoff the existing mortgage if the estate does not have the funds.

... but, if for example there is life insurance or other funds available in her estate they will be applied to the mortgage before any distribution to beneficiaries of her will.

Thrugelmir

laurab321 said:

Thrugelmir said:

The mortgage will need to be discharged in one form or another. 

Technically yes. However they will benefit from any property price increases.

Subject to the mortgage. Yes. Not unreasonable. Though 5 years is an odd period of time. 

What if we’re not in a position to pay for another mortgage - or want to take on another mortgage for that matter just to enable someone else to live there.  

Then the house gets sold to settle the debt. You are under no obligation to remortgage the property. The will does not supercede the lenders rights to full repayment of the debt. 

Perhaps there's life assurance in place or your mother and boyfriend have other plans of which you are are unaware. There's a good chance the mortgage will be paid off before your mothers demise I suspect. 

RetSol

You are absolutely right to be concerned, @laurab321.  I strongly suggest that you raise your concerns with your partner's mother.  This matter concerns you personally.  Mother is entitled to make whatever provision in her will she thinks fit but has a responsibility not to leave a mess behind. 
Do not assume that the mortgage will be paid off before mother dies.  She could die tomorrow.
If mother is not using a solicitor to draw up the will, she needs to.  The will needs to be properly drafted and she and her partner need to understand the implications for themselves and for you and your sibling.  Who pays the bills on the property during the 5 year grace period?  The inability to pay off the mortgage on her death could defeat her intentions and the partner's right to remain in the property.   All  parties need to understand this.
Term assurance taken out by mother now would pay off the mortgage on her death.  Term assurance was cheap when I used it years ago although the cost will depend on mother's age and health. 
Life assurance would also work but not if it mother's partner is the beneficiary.  He will not pay off a mortgage on a property which he does not own. 
Any solution dependent on insurance relies on the insurance being maintained.  

Thrugelmir

RetSol said:

You are absolutely right to be concerned, @laurab321.  I strongly suggest that you raise your concerns with your partner's mother.  This matter concerns you personally.  Mother is entitled to make whatever provision in her will she thinks fit but has a responsibility not to leave a mess behind. 

Some would say mind your own business. Money can bring out the worst in families. 

MWT

RetSol said:

You are absolutely right to be concerned, @laurab321.  I strongly suggest that you raise your concerns with your partner's mother.  This matter concerns you personally.  Mother is entitled to make whatever provision in her will she thinks fit but has a responsibility not to leave a mess behind.

Might not want to dive right in and assume there is a 'mess'.

This is primarily a matter for the OP's partner, not for the OP.

The primary concerns raised have been answered, there is no obligation to take on a new mortgage due to the inherited house, and if they already own a property now as their main residence they will be able to sell that and purchase a new main residence without incurring any SDLT penalty on the transaction due to the inherited house.

There may well be aspects of this that the partner's mother has not fully considered, such as the beneficiary of any life insurance, but that is not something to start questioning directly if for whatever reason the partner does not want to have that conversation.

In short there is no obvious risk for the OP from this plan, only an upside, albeit potentially one that is delayed for 5 years post-death.

Unless there is some reason to believe that the mother's demise is immanent, I would suggest letting her partner raise the questions when they feel comfortable doing that...