What Happens to a Mortgage Following a Death?
Although a sad topic, for many people who lose their partners, the idea of ongoing mortgage payments can be both daunting and confusing. In short, the deceased’s monthly mortgage payments still need to be covered. As each mortgage and property is different for every family, the plan of action varies from case to case. What must be remembered is that lenders are human too and will often put a hold on repayments during the time of mourning, allowing people to get affairs in order at their own pace.
Although it can seem heartless, mortgage lenders have the right to demand the full outstanding mortgage to be paid if the account holder has passed away. Whilst many will be empathetic towards the sad situation, requesting the payment of the balance is legal. If this cannot be met by the estate (the deceased’s assets) the lender can suggest that the property is sold in order to repay the debt owed to them.
Keeping a home if you have a joint mortgage
When two or more people own a property, they can do so as either joint tenant or tenants in common. This can apply to married couples or any group of people that have bought a property together.
If somebody passes away in a joint tenant home, the survivors inherit the house. If the property is owned under tenants in common, the share of the house owned by the person who died, passes under the terms of their Will – if they have one – or under the intestacy rules.
Joint tenant homes are taken out in names of all the owners. If there is an outstanding mortgage, the regular monthly payments still need to be made and remaining occupants will need to continue these as normal.
For couples who have taken out a joint mortgage, the remaining spouse is liable for keeping up with the mortgage repayments in the event that their partner dies.
However, it is worth remembering that homes will not automatically be transferred to the remaining party. The mortgage and property will need to be transferred into the name of the surviving person or persons. But, this can only be completed by applying for a mortgage in your own name. Some people are not granted a new mortgage for financial reasons and may face selling their home. Similarly, without life insurance, mortgage payments can be a struggle. This is another scenario where some people have no choice but to sell their home.
Keeping an inherited property
If you have been left a home when somebody has passed, the executor of the will initially uses the deceased’s assets to pay off any debts. Sometimes, the property may need to be sold to pay off any outstanding debts. The only way an individual could keep a house in this scenario, would be to pay off the debts out of their own pocket to avoid selling the property.
If the loved one who has passed away had a life insurance policy, people who have inherited a property may receive a payment like that of a spouse. This cash can be used against mortgage payments.
Those who choose to take a property on and not sell, whether they are living in it themselves or letting it, will need to keep up with monthly mortgage payments.
Keeping a home if there was no will
In the event that there is no will to determine who will inherit a property, it is up to the law to determine the outcome. More often than not, the home is passed to a spouse, partner or child.