Inheriting share of mortgaged property

Smudgeismydog

A friend’s mum recently died, and she has inherited her share of the property. The house was owned as tenants in common with her mum and stepdad, who can remain living there for the rest of his life.
There is an interest only mortgage on the house, which was in joint names (mum and stepdad), the original fixed rate will shortly expire, and the stepdad has told my friend that she must now be added to the mortgage with him.

Although he has said she won’t need to pay the mortgage, she is concerned that by being on the mortgage she will be liable if he fails to pay, and whilst she has inherited a share of the house, she doesn’t believe she inherits her mothers debt. 

Would be very grateful for your thoughts.

Devongardener

If it’s an interest only mortgage your friend needs to know whether there is a plan in place to repay the capital, if not then the house will have to pay sold to repay it at the end of the mortgage term.  It sounds like the stepfather needs her to be on the mortgage renewal application to qualify for the new mortgage.
She certainly doesn’t have to be on it.

silvercar

She would be silly to agree to go on the mortgage, she gains nothing from doing so. 

RAS

Since step-dad appears to have been granted a life interest, which creates an Immediate Post Death Interest trust, there will be no change in the deeds, as step-dad now has sole beneficial interest. 

The friend needs to speak to a good STEP solicitor who can convert the words in the will into lay speak, so friend understands their liabilities. It is normal for the person with life interest to be responsible for the property, not the remaindermen, but they need to check.

Step- dad may want or need to sell and buy cheaper and the will should specify what happens if he does. The trust needs registering with the HMRC with 2 years.

Keep_pedalling

This is complicated, the will has created an immediate post death interest trust so your friend does not actually inherit until the death of her step father. Legal ownership of her mother’s share is now with the trust, but beneficial ownership is with her step father. 

She has no obligation to be on the mortgage and I am not even sure she could be so I think this is his  problem to resolve. Equity release is one option for older people on IO mortgages but I can’t see any providers who would help with half the home in trust. He should probably speak to a broker to see what if any options there are.

Is there enough equity in the home that would allow downsizing and paying off the mortgage? 

Linton

silvercar said:

She would be silly to agree to go on the mortgage, she gains nothing from doing so. 

It could be seen as a gain If she has a good relationship with her stepfather and wants to keep it. Money can easily split up families.

Keep_pedalling

One option, if she has the assets available, would be to pay off the mortgage and secure that with a charge against the property. 

silvercar

Linton said:

silvercar said:

She would be silly to agree to go on the mortgage, she gains nothing from doing so. 

It could be seen as a gain If she has a good relationship with her stepfather and wants to keep it. Money can easily split up families.

Good relationships can become bad, particularly if stepfather couldn't pay the mortgage. Also what happens if stepfather meets a new partner? 

Sea_Shell

I didn't think you could inherit "debt"?

How that squares with inheriting a share of a mortgaged property is an interesting question.

SVaz

Indeed,  you would expect they would have had life insurance to pay off the mortgage. 

If the equity isn’t far larger than the mortgage, there won’t be anything to inherit!   

She would be mad to go on the mortgage,  he could stop paying and she would be liable.

Smudgeismydog

Thanks for your comments, to try and answer some of your questions (from what she has told me);

- there was no life cover in place
- stepdad can meet the mortgage payments by himself
- relationship is not good
- her mum owned a 35% share in the property, and this is what my friend will inherit
- as far as she is aware, there is no plan to repay the mortgage, the debt will be paid off on second death from the sale proceeds
- she is not working due to ill health, so no salary, hence why she is worried about potentially being liable for this mortgage 
- she doesn’t have the assets to pay off the mortgage 


Thanks, it is an interesting one