What happens to a mortgage after death?
In the event of death, the deceased’s debts still need to be paid. These include monthly mortgage payments. In these unfortunate circumstances, what happens to the property and its mortgage can vary case-by-case, but there are some key things that you may want to know. They include the following:
What do lenders require?
They have the right to demand the full amount of the mortgage to be repaid. If this cannot be met by the estate, the lender can ask for the property to be sold in order to repay whatever is owed to them.
Can you keep the property?
The executor of the will normally uses any assets to pay off debts. Depending on how much is owed, this could potentially involve selling off the property.
If you’ve inherited the property, you are responsible for any mortgage repayments. Your loved one’s life insurance might pay for this – if not, the responsibility falls to you.
If you choose to keep the property with a mortgage, you’ll have to make monthly repayments, whether you’re living there or letting it out. Your ability to repay the mortgage loan will be assessed by the lender.
What if you’ve got a joint mortgage?
There are a few scenarios which involve the ownership of a joint mortgage:
- If you owned the property under ‘joint tenancy’, you’ll inherit the property outright. This means that any debt, such as mortgage repayments, will be your responsibility.
- If you owned the property as a ‘tenancy in common’, the owner of the share held by the deceased should be named in their will. This person may be you, in which case you’ll own the property outright. However, it may be the case that their share of the property is given to someone else, or used to pay off any other outstanding debts.
- If there is no will, it is up to the law to determine who will inherit the deceased’s share of the property.
The ownership of the property doesn’t need to be dealt with immediately
If you’re going through a tough time, it may be difficult to deal with practical matters, such as organising and paying for the funeral, and informing authorities such as credit reference agencies. Lenders tend to be sympathetic about bereavement, and may put a hold on repayments until it has been decided who is responsible for the estate and its debts..
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