Dealing with the death of a loved one is an emotionally challenging time, and the last thing you want to worry about is their mortgage. However, it’s crucial to understand what happens to a mortgage when the borrower passes away. The outcome largely depends on the type of ownership, the presence of a Will, and the financial situation of the surviving partner or inheritors.
The death of a mortgage holder can lead to confusion and uncertainty for the surviving family members. It’s essential to familiarise yourself with the potential outcomes and the actions you may need to take to ensure a smooth transition during this challenging period. In this blog, we’ll explore the various scenarios and guide you through the steps to take when faced with this situation.
What happens to the mortgage if you have a Joint Tenancy?
Suppose you and your partner are joint tenants. In that case, the mortgage will automatically pass to the surviving partner upon the death of one borrower. This is because joint tenancy operates under the ‘right of survivorship’, meaning the property ownership is transferred to the remaining joint tenant(s) without probate. As the surviving partner, you will be solely responsible for making the mortgage payments and ensuring the loan is paid in full.
Notifying the mortgage lender of your partner’s death as soon as possible is essential. They will guide you through the necessary steps to update the mortgage account, which may require a copy of the death certificate. Remember that while the property ownership changes, the mortgage terms generally remain the same. Suppose you anticipate difficulty meeting the mortgage payments on your own. In that case, it’s essential to communicate with your lender to discuss potential options, such as a mortgage holiday or a repayment plan.
Joint tenancy is a popular choice among couples who want to ensure that their partner will inherit the property without the need for probate. However, It’s important to consider the implications of becoming solely responsible for the mortgage. If you have concerns about your ability to make the payments independently, it may be worth discussing alternative ownership structures or financial planning strategies with your partner and a legal professional.
What happens to the mortgage if you have a Tenancy in Common?
Tenancy in Common is a type of property ownership where each owner has a distinct share of the property. Unlike joint tenancy, these shares can be unequal and passed on to beneficiaries through a Will. If your partner dies and you have a Tenancy in Common, their share of the property will be distributed according to their Will or, in the absence of a Will, by the intestacy rules.
If the deceased partner’s share of the property is left to you, you will become responsible for the entire mortgage. However, if their share is left to someone else, such as their children or siblings, the new owner will be responsible for their portion of the mortgage payments. This can create a complex situation, particularly if the new owner cannot contribute to the mortgage. In such cases, selling the property to pay off the mortgage and distributing the remaining funds according to the ownership shares may be necessary.
Tenancy in Common can be a suitable option for couples who wish to leave their share of the property to someone other than their partner, such as children from a previous relationship. However, it’s crucial to have open discussions about the potential consequences and to ensure that all parties understand their responsibilities in the event of one owner’s death. Setting up a life insurance or mortgage protection plan can provide financial security and help mitigate the risk of mortgage default.
What to do if I can’t afford the mortgage after my partner dies?
If you find yourself unable to afford the mortgage after your partner’s death, it’s crucial to act quickly and explore your options. The first step is to contact your mortgage lender and explain your situation. They may offer temporary solutions, such as a mortgage holiday or a reduced payment plan, to help you through this difficult time.
Another option is to consider downsizing to a more affordable property. Selling the home and using the proceeds to pay off the mortgage can relieve you of the financial burden and allow you to find a more manageable living situation. Alternatively, you can rent out a portion of the property to generate additional income to cover the mortgage payments.
Suppose your partner had life insurance or mortgage protection insurance. In that case, these policies can provide financial support to cover the mortgage in the event of their death. It’s important to review any insurance policies and contact the providers to understand the claims process and the benefits you may be entitled to receive.
In some cases, you may be able to access government benefits or support services to help with mortgage payments. Organisations such as Turn2Us and Citizens Advice can provide guidance and information on the available options. It’s also worth considering seeking financial advice from a qualified professional who can help you assess your situation and develop a plan to manage the mortgage payments in the long term.
What if there is no Will?
If your partner dies without leaving a valid Will, their estate will be distributed according to intestacy rules. Under these rules, the surviving spouse or civil partner typically inherits the deceased’s share of the property if its value is below a certain threshold. If the value exceeds this threshold, the surviving partner may inherit a portion of the estate, with the remainder divided among other relatives, such as children or parents.
Without a Will, distributing the estate can be more complex and time-consuming. An administrator may be necessary to manage the estate and ensure that the mortgage payments continue to be made during this period. If you find yourself in this situation, it’s advisable to seek legal advice to understand your rights and obligations as the surviving partner.
Dying without a Will, also known as dying intestate, can lead to unintended consequences and may not reflect the deceased’s wishes. Homeowners must create a valid Will that outlines their intentions for their property and ensures that their loved ones are provided for. Regularly reviewing and updating the Will, especially after significant life events such as marriage, divorce, or the birth of a child, can help prevent confusion and disputes in the event of an unexpected death.
Can I buy other people out of an inherited property?
If you have inherited a property with other beneficiaries, such as siblings or children, you may buy out their shares to become the sole owner. This can be an attractive option if you want to continue living in the property or if you believe the property has the potential to increase in value over time.
To buy out other inheritors, you must value the property to determine the current market value and each beneficiary’s share. You can then negotiate with the other inheritors to purchase their shares by paying them outright or arranging a mortgage to cover the cost. It’s essential to have a written agreement outlining the terms of the buyout to avoid any disputes in the future.
If you cannot afford to buy out the other inheritors, you can sell the property and divide the proceeds according to each beneficiary’s share. This can be a more straightforward solution, especially if the property needs repairs or the inheritors disagree about what to do with it.
