In this brief guide, are going to discuss what happens to a mortgage when someone dies in the UK.
It is very common that people will die with mortgages in their names, these may even be a spouse dying with the mortgage in their name.
This brief guide covers what happens to a mortgage when someone dies in the UK with a mortgage in their name.
There are lots of other factors to consider when dealing with mortgage and death so adequate independent financial and legal advice is needed.
The important thing to note is that when a person dies the mortgage debt does not die with them.
What happens to a mortgage when someone dies in the UK?
When someone dies in the UK the executor of the person’s estates will usually use any assets the person has to pay off any debts. This means the house may be sold to pay off any outstanding mortgage balance on the property. If the property is inherited then the person inheriting it will be responsible for the mortgage balance but only after a mortgage lender has agreed to give them a mortgage for the outstanding mortgage balance.
The executor of the estate will usually use all assets the person has to pay off any of their existing debts before passing on what is left to the beneficiaries named in the will.
In some cases, this means the house may need to be sold to pay off other debts that the person may have had.
Once someone who had a mortgage has died, the best thing is to seek legal and financial advice and then notify the mortgage lender as soon as possible.
Once a mortgage borrower has died, things can get complicated pretty quickly. You have to consider numerous factors such as inheritance tax etc.
Who pays for the mortgage when someone dies in the UK?
The mortgage will still need to be paid when someone dies and this means that the estate and executor will have to continue making the monthly mortgage repayments or lose having the home repossessed by the mortgage lender.
In most cases, the mortgage lender will understand that there is a legal process which may take some time to be concluded and may even allow a mortgage payment holiday whilst this is ongoing.
If the home has been given to someone in the wil then they simply cannot transfer the mortgage to their name, they will first need to pass the mortgage lenders mortgage affordability assessments or another mortgage lenders mortgage affordability assessment before they can take on the mortgage.
If they are unable to find a mortgage lender willing to lend to them and there is no life insurance or any other suitable insurance or savings which can be used to pay off the outstanding mortgage balance then they will need to sell the property even if you can afford to make the monthly mortgage repayments without an official mortgage.
Who pays for a joint mortgage after death?
If one party in a joint mortgage dies then the mortgage balance is now the sole responsibility of the other party or parties in the joint mortgage.
Once someone in a joint mortgage dies you will need to remove them from the mortgage and transfer the mortgage to the party who the home has been willed to or the other party in the joint mortgage.
Again, a mortgage lender will need to be satisfied that you can keep up on the monthly mortgage repayments and they will take you through their mortgage affordability checks.
If you do not pass the mortgage lenders or any mortgage lenders affordability checks then you won’t be able to transfer the mortgage to your sole name and may need to add someone else to the mortgage or sell the property if there is no life insurance or savings to pay off the outstanding mortgage balance.
What happens to a “tenants in common mortgage” when one party dies?
If one party in a “tenants in commons mortgage” dies then their ownership in the property, as well as the outstanding mortgage balance they were responsible for will be passed on to their beneficiaries which are named in the will.
Without a will in place, the property may be shared out according to the rules of intestacy.
This could mean your share n the property could end up with someone you didn’t want.
What to do if you can afford to pay the mortgage when someone dies in the UK?
If someone dies in the UK and you can’t afford to pay the mortgage which you have inherited then you should look at the below options:
- You can try to get an interest-only mortgage which may have cheaper monthly mortgage repayments but you will need to have a suitable capital repayment vehicle
- You can ask the mortgage lender for a payment holiday
- You can increase the mortgage term and look to bring the monthly mortgage repayments down
- You can sell the home and downsize to a much more affordable property
- You can pay off the mortgage using an insurance product
If you cannot use any of the options above then you may end up losing your home through a home repossession.
Getting life insurance
Getting life insurance will go a long way to help your family or beneficiaries by covering the cost of any outstanding mortgage balance if you should die.
You can get either a :
Decreasing term insurance
Or a level term insurance
A decreasing term insurance will decrease each month as you continue to make your monthly mortgage repayments.
A level term insurance will stay the same for the duration of the cover.
FAQs: What happens to a mortgage when someone dies in the UK?
Below are some of the most frequently asked questions in relation to the question “ What happens to a mortgage when someone dies in the UK? “
Who is responsible for a mortgage after death?
The executor will be responsible for a mortgage after death. Once the executor has handed over the assets to the beneficiaries of the will then the home will pass over to whoever was listed in the will if they can afford the monthly mortgage repayments.
Can you inherit a house that still has a mortgage?
Yes, you can inherit a house that still has a mortgage but the mortgage lender will need to put you through the mortgage affordability checks to ensure that you can afford the mortgage.
Do you need a will if you have a mortgage?
No, there is no requirement to have a will if you have a mortgage but you may find it relevant so your finances are in order if you passed away.
Executor: An executor is someone who is named in a person’s will to manage their estate when they have died.
An executor will be responsible for ensuring what as written in the will is performed. People usually choose their spouses as their executor.
Estate: An estate is essentially everything someone owns upon their death. This includes cars, investments, houses, cash etc.
When considering jointly owned assets some legal advice may be needed.
In this brief guide, we discussed what happens to a mortgage when someone dies in the UK.
If you have any questions or comments please let us know.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.