Probate - Interest Incurred on outstanding mortgage

Jamie2126

Hi - new to the forum, so go easy :-)

I lost both my parents within 3 months of each other back in 2022. Due to their will being drafted but not signed probate was submitted in March 2022 to allow me to act as Executor to their estate. It has taken 16 months for probate to be granted allowing the sale of my parents house to proceed.

During this time, the mortgage lender has continued to apply interest on the mortgage month-on-month, which has now amounted to approximately £10k of interest being incurred.

My question is - as with Credit Card/ Utility debits, these are frozen and no further interest is applied until the sale of assets and settlement of the debits

Probate was submitted in March 2022 to allow me to act as Executor to their estate. It has taken 16 months for probate to be granted allowing the sale of my parents house to proceed.

Has anyone successfully appealed to their mortgage lenders to have their interest payments reviewed or refunded?

Selling my parents' house was not possible for me during the 16 months it took for probate to complete. I was unable to speed up this, and trying to escalate requests to the Probate Registry was unsuccessful.

Any comments welcome.

Thanks

Jamie

user1977

I've never heard of mortgage interest being frozen. Presumably you've already correspondence with the lender - what did they say?

Jamie2126

They advised that interest would continue until the account is settled.

The fact the probate was needed and took 16 months to complete which was out of my hands, I was unable to sell the property to settle the mortgage.

Seems a little unfair that the public are being penalised for something out of their control

Keep_pedalling

I am afraid it is standard practice for mortgage interest to continue to be added after death. The only way to avoid more interest being added is if you can clear the mortgage before the house is sold. 

user1977

Jamie2126 said:

They advised that interest would continue until the account is settled.

The fact the probate was needed and took 16 months to complete which was out of my hands, I was unable to sell the property to settle the mortgage.

Seems a little unfair that the public are being penalised for something out of their control

They're not being "penalised", the estate has the lender's money, and presumably the lender is merely applying the standard rate which the deceased would have paid anyway.

This is different from penalties etc being applied to other types of debt because the executors are defaulting on requirements to pay.

Jamie2126

The point I'm raising is that in this case probate took 16 months to complete and there was no way in speeding this up. To be able to settle the account the house needed to be sold - but dependent on probate being granted. I feel that is these circumstances there should be a review and where it is determined that everything is being done to settle the account as soon as practical concessions could be applied. 

SiliconChip

You can raise a formal complaint with the lender as Executor, and if you don't get the response that you want you can then raise it with the FOS. It won't cost you anything but I think they will reject your complaint.

Keep_pedalling

There is nothing stopping you asking them, but they are under no legal obligation to do so. The fact that there were complications that dragged out probate for so long is not their fault, and if this was an interest only mortgage (it rather sounds like it is) then your parents really should have had something in place to pay it off such as life cover that would pay on the first death otherwise how would a surviving spouse cover the interest had they survived much longer than 3 months.

user1977

Jamie2126 said:

The point I'm raising is that in this case probate took 16 months to complete and there was no way in speeding this up. To be able to settle the account the house needed to be sold - but dependent on probate being granted. I feel that is these circumstances there should be a review and where it is determined that everything is being done to settle the account as soon as practical concessions could be applied. 

Would you expect the estate to still benefit from interest, dividends etc on any investments while the estate is being wound up?

pjs493

Legally mortgage interest continues to accrue, no matter how long Probate takes. Credit cards will freeze and usually ISAs continue to fluctuate with the markets (if it is a stocks and shares ISA) or continue to accrue interest (if it is an interest only ISA). The only way to avoid or reduce the interest is by continuing to make payments on the mortgage.

I'm currently a few months into dealing with my late husband's estate which includes a flat he bought in his early 20s and has been rented out for the last few years as we travelled with his job. I have continued to make payments on the mortgage, up to the maximum allowed overpayments for the current period. I started making larger monthly payments and then once they received the documents confirming my husband's death and his Will naming me as executor, they paused the mortgage payments for 12 months and I then paid the maximum overpayment for the period as a lump sum. It is as much as I can do to reduce the mortgage interest. I expect Probate to be granted by the end of March/beginning of April at the latest and at that point I will have to pay off the balance of the mortgage.

Your options will likely depend on the mortgage provider, but I have been told that I can avoid exit fees and early repayment fees if I pay off the balance on presentation of the Grant of Probate. If I pay it off before then I would be responsible for paying the fees. I basically had to make a cost benefit analysis and decide what the best option was to avoid as much mortgage interest as possible. As executor you are able to make payments out of the estate to pay the mortgage while the estate goes through Probate. I'm assuming that there is no money in the estate, only debts, which is why you didn't continue making payments off the mortgage.

Unfortunately, there is no way to get back the interest that has accrued, but as it appears that this might be an insolvent estate, I'm not sure it really matters in the grand scheme of things.

Mark2spark

Don't overlook that it's likely (in a normal marketplace) that the property would have continued to rise in value whilst this 16 months went by. You wouldn't be complaining about that?