Mortgage provider insisting I pay default rate of 8.5% on inherited property

LHouseley

Dear Forumites,
I am hoping you might have some advice about a mortgage issue that I have.
After my father very sadly passed away at the end of 2022 I inherited a property. The house has a mortgage on it. The process of gaining probate was particularly lengthy due to HMRC delays and I eventually gained probate at the end of 2023. The mortgage provider of the house gave me a payment holiday during this time (although interest accrued on the mortgage). 

Since I received probate I have looked into what to do with the house, which is a rented property and has a long-term sitting tenant. I explored all options and enquired about different re-mortgaging options. I spoke at length with the current mortgage provider. As you might imagine, the rates that I am offered now, are very different to the rate of the existing mortgage. I decided to keep the property, part pay-off the mortgage and take out a small mortgage for the remainder with the same mortgage provider. That mortgage has now been applied for, paperwork just sent through to them.

However - this is my problem:
Whilst the mortgage provider has given me a payment holiday all this period, at the end of this month the product ends and the mortgage provider will apply their default rate of around 8.5%. They say that this means that the payment holiday must also end and that, from April, I must pay the £877 per month mortgage until my remortgage application with them is processed and granted.

My question is: Must they remove the payment holiday once the current product ends? They have stated this, and I have queried it, as though it is a necessity, but is it in their power to use discretion and continue to extend the payment holiday until my new mortgage is in place? As I have inherited the property and the mortgage and have had just a short time to organise a new mortgage and have done so, it seems unfair that the timing of the product ending should result in such a high cost.

Many Thanks, Laura

sammyjammy

Sorry for your loss.

Of course its within their power, I would imagine they think you've had enough time to sort the property out, this is now your property and therefore your fathers death is irrelevant (to them).

ACG

If the product finishes this month, you have reverted to the standard variable rate by the sounds of it. 
Thats completely normal.

I do not think they have discretion to offer you a lower rate during the interim. We live in a regulated world, that means every person has to be treated equally - discretion tends to go out of the window in order to not fall into problems with the FCA. In short, if they did it for you they may have to do it for other people. 

silvercar

It may be worthwhile separating the mortgage your late father had, with the new mortgage you have. Mortgages don’t transfer, they are redeemed when the property is sold or changes hands. So the estate of your late father owned the property and had the mortgage, once the transfer has taken place the property will be in your name and you will take out a mortgage. Until that point the mortgage payments come from the estate as it is the estate that has the mortgage. 

Same with the landlord tenant relationship, the estate through the executor is the landlord until the property changes hands, at which point the tenancy transfers to the new owner. You need to notify the tenants of this officially.

dunstonh

My question is: Must they remove the payment holiday once the current product ends?

You are lucky to have had authorised arrears.   That was a goodwill gesture on their part.     Not an uncommon gesture in this scenario but it won't be open ended.  It is there generally to allow the estate to be settled.

 but is it in their power to use discretion and continue to extend the payment holiday until my new mortgage is in place?

It is within their power but then so is completely writing of the mortgage and whole load of other things.    That is the wrong question to ask.   

In these days of consumer duty, they have to be careful of allowing things to individuals that are unusual.    If you offer it to one, you can be at risk of having to offer it to all.       Plus, their processes will be documented and they are meant to follow those.     

 As I have inherited the property and the mortgage and have had just a short time to organise a new mortgage and have done so, it seems unfair that the timing of the product ending should result in such a high cost.

Technically, you haven't inherited it yet.   The executor of the estate is still in control of the assets and liabilities.  Until you do, then the estate suffers the gains and liabilities.   Fairness doesn't come into play as the deal ending is a defined point in time.    

Lenders will give a reasonable timescale but with the death at the end of 2022 and it now being 3 months into 2024, that is a very long time to get an estate settled.  Probate is only taking a few months.   So, something has caused this to be much longer than typical.     

Sorting a mortgage on a property without a chain is about 3-4 weeks.   So, why have you waited 15 months?  You can understand a month or two before starting the process but the longer it takes the longer it is to justify.     Could it be that you were waiting as long as possible on the existing deal because it was a good rate?

And at the end of the day you are going to be paying the higher interest rate whether it is paid by the estate from the assets or added to the mortgage.  You have to buy the property off the estate and the estate has to repay the mortgage and only at the point should the excess in the estate (i.e. the rental income built up as it wasn't paying the mortgage) should be distributed to the beneficiaries.  So, there should be plenty of money available to pay this.

Hoenir

LHouseley said:

 but is it in their power to use discretion and continue to extend the payment holiday until my new mortgage is in place? 

Your only capacity in the lenders eyes is that as legal executor of the estate. Whatever you do in a personal capacity is a totally unrelated matter.  The old mortgage needs to be discharged as soon as possible. 

kingstreet

Until the estate is settled, the rental income from the property belongs to the estate just as the mortgage and its payments are the responsibility of the estate. The estate appears to have escaped making payments for a limited period completely at the lender's discretion, but presumably the rental income hasn't stopped?

Usual suggestion in such circumstances is for the beneficiary to purchase the property from the estate using a purchase mortgage to do so and using their (soon to be) inherited equity as the deposit.

LHouseley

@silvercar Thank You for this advice. Yes, it helps to separate the issue between the estate and the beneficiary. And thank you for the reminder to alert the tenant to the change of ownership, I shall make sure to do that.

LHouseley

@dunstonh

"Fairness doesn't come into play as the deal ending is a defined point in time."

My question, really, was about whether payment holidays must end when the product ends or not and whether or not the circumstances of the different applications can be taken into account or whether this is a hard end to any help offered by the provider. It seems from the responses that the answer is yes it is.


"Lenders will give a reasonable timescale but with the death at the end of 2022 and it now being 3 months into 2024, that is a very long time to get an estate settled.  Probate is only taking a few months.   So, something has caused this to be much longer than typical."

That is correct, something did: HMRC. I had to prepare tax returns for my late father before being able to complete the probate application. HMRC took 4 months to process the tax forms, and then took a further 6 months to process the probate application. Probate, at the moment, does NOT take only a few months. I was warned at every junction that I would likely have a 6 month wait once the paperwork was in.

"Sorting a mortgage on a property without a chain is about 3-4 weeks.   So, why have you waited 15 months?  You can understand a month or two before starting the process but the longer it takes the longer it is to justify.     Could it be that you were waiting as long as possible on the existing deal because it was a good rate?"

Wow. What a cynical assertion to make for a situation you know nothing about. No @dunstonh, I was not waiting as long as possible. I was diligently going through the laborious paperwork whilst grieving and waiting an agonising amount of time for probate to come through, all the while watching the clock ticking down on the mortgage and worrying about what would happen if I didnt have a new one in place when it did. You seem to not be aware that I could not negotiate anything with the mortgage provider until I had received probate papers and I have then worked as quickly as I can to get a new mortgage.

"So, there should be plenty of money available to pay this."
Lols. 

LHouseley

@kingstreet
Thank You for your reply. Yes, what you describe is essentially what is happening now.
Whilst the estate escaped paying a monthly mortgage payment for the period I was waiting on probate, interest has accrued on the mortgage account over that period. Now the small amount of rent received over this time and received by the estate will go towards paying off the accrued interest. The standard rate that I now have to pay the mortgage provider whilst waiting for the new mortgage to be approved is more than twice what the rental income for the property yields.