Inheriting share of mortgaged property

doodling

Hi,

I think that answers to the following questions need to be known to work out the next steps:

1. Does the deed of trust say anything about what happens if one of the house owners dies?  If there isn't a deed of trust, what defines the ownership split?

2. Did anything document who was responsible for paying the mortgage (might be the deed of trust, or something else)?

3. Are there any other assets in the deceased's estate apart from the house?

4. What is the current value of the property?

5. What is the current mortgage balance?

6. How is the deceased's share of the value of the house protected in the event that the remaining owner wants to sell / remortgage?

I think that information would then help answer the following questions:

1  If there are other assets, should the deceased's share of the outstanding mortgage balance be considered a debt which the estate needs to pay?

2. What is the value (both absolute and in percentage terms) of the deceased's share of the house?

The executor almost certainly shouldn't be signing up to a mortgage.  If the existing mortgage was a joint mortgage then it would continue to either the end of its term or the death of the remaining owner.  If the end of the term comes first then, if the remaining owner is unable to remortgage, the house would need to be sold - what happens to the deceased's share at that point would depend on the terms of the trust set up by the will.  I'm not sure whether it is possible to get a mortgage where one of the owners is not party to the mortgage - I suspect that it would be challenging for the remaining owner to remortgage because of this, but that is not directly the executor's problem.

Depending on whatever agreement there was about the mortgage payments, the deceased's share of the value in the property might shrink (but the absolute monetary value would not) if the remaining owner pays any capital off the mortgage balance (e.g. by paying a repayment mortgage or making capital payments on an interest only mortgage).

The executors interest in the property needs to be protected in some way whilst the remaining owner is still alive.  The existence of a mortgage makes this more complex as the existing (and any future) mortgage company would require a charge over the whole house, not just the surviving owner's share.

Whilst we might be able to give some comments if we have more information, I think that getting the answers to my first set of questions and spending an hour or two with a solicitor to go through some "what if"s is a must in this case.

Smudgeismydog

Many thanks for your time and response, I will contact her to ask these questions and come back to you 

Smudgeismydog

1. Does the deed of trust say anything about what happens if one of the house owners dies?  If there isn't a deed of trust, what defines the ownership split? Declaration of trust specifies ownership split, mum 35%, stepdad 45% and mortgage company 20%. This notes that if either party redeems any or all of the mortgage, their share of the property would increase. It also states on sale or transfer of the property, then after all expenses and mortgage being redeemed, the net proceeds are to be divided between the two parties in the percentages noted.

2. Did anything document who was responsible for paying the mortgage (might be the deed of trust, or something else)?

3. Are there any other assets in the deceased's estate apart from the house?

4. What is the current value of the property?

5. What is the current mortgage balance? £120,000

6. How is the deceased's share of the value of the house protected in the event that the remaining owner wants to sell / remortgage?

Hoenir

Keep_pedalling said:

Hoenir said:

Smudgeismydog said:

- stepdad can meet the mortgage payments by himself

The lender needs to be notified of the death of one of the mortgage holders as soon as possible. The debt will need to be repaid, transferred into a sole name or remortaged to a new lender. As the Deceased's Estate remains liable. The Executor's would be failing in their legal duty if they didn't deal with the matter. 

I don’t think that is the case, the surviving spouse is entirely responsible for the mortgage as it would have been given on a jointly and several basis. 

Mortgage terms and conditions will specify that the lender needs to be notified upon the death of one of the account holders. That's a standard term. 

Smudgeismydog

Sorry, didn’t mean to post until I’d gathered all the info.

1. Does the deed of trust say anything about what happens if one of the house owners dies?  If there isn't a deed of trust, what defines the ownership split? Declaration of Trust specifies ownership split, mum 35%, stepdad 45% and mortgage company 20%. This notes that if either party redeems any or all of the mortgage, their share of the property would increase.

2. Did anything document who was responsible for paying the mortgage (might be the deed of trust, or something else)? Nothing on the declaration of trust, and she is not aware of anything else

3. Are there any other assets in the deceased's estate apart from the house? My friend has received £30,000, and both of her children have £5,000 each

4. What is the current value of the property? @£550,000

5. What is the current mortgage balance? £120,000

6. How is the deceased's share of the value of the house protected in the event that the remaining owner wants to sell / remortgage? The Declaration of Trust states on sale or transfer of the property, then after all expenses and mortgage being redeemed, the net proceeds are to be divided between the two parties in the percentages noted.

Keep_pedalling

Smudgeismydog said:

Sorry, didn’t mean to post until I’d gathered all the info.

1. Does the deed of trust say anything about what happens if one of the house owners dies?  If there isn't a deed of trust, what defines the ownership split? Declaration of Trust specifies ownership split, mum 35%, stepdad 45% and mortgage company 20%. This notes that if either party redeems any or all of the mortgage, their share of the property would increase.

2. Did anything document who was responsible for paying the mortgage (might be the deed of trust, or something else)? Nothing on the declaration of trust, and she is not aware of anything else

3. Are there any other assets in the deceased's estate apart from the house? My friend has received £30,000, and both of her children have £5,000 each

4. What is the current value of the property? @£550,000

5. What is the current mortgage balance? £120,000

6. How is the deceased's share of the value of the house protected in the event that the remaining owner wants to sell / remortgage? The Declaration of Trust states on sale or transfer of the property, then after all expenses and mortgage being redeemed, the net proceeds are to be divided between the two parties in the percentages noted.

I think it highly unlikely that a further IO mortgage is going to be on the table for him, which leaves 2 options. To clear the mortgage by downsizing to a property priced at the £420k mark, or obtain a lifetime mortgage to pay off the IO mortgage. The second option may not be possible with the trust in place so a bigger LM of around (270k) may be needed to both pay off the existing mortgage and buy out the trust. 

mattojgb

Does the will say anything about what happens if the house is sold, e.g. if the life interest terminates on sale?

Note also that I interpret what has been written about the Declaration of Trust, as meaning mum's share would be 44% of the proceeds of sale (35% of 80% - the other 20% being relinquished by the mortgagee on redemption of the mortgage - unless stepdad repays some capital)

The mortgage might be a shared ownership mortgage (given the mortgagee retains part ownership). These typically require payment of rent to the mortgagee on the part that they own as well as interest payments.