When someone who has a mortgage dies, it is important to notify the lender as soon as possible. If the property has been left to you in a Will, you should ask them about the options for taking on some or all of the mortgage if it cannot be repaid.
After a death, notifications need to be sent to all of the organisations where the deceased held an account. This includes any mortgage lender.
What happens next
The monthly payments will still need to be made while the estate is administered. If the mortgage was in the sole name of the deceased, then the mortgage company has the right to ask for the repayment of the amount owed in full.
If the property is passed to someone else and they are able to meet the mortgage payments, then the mortgage company may consent to transferring the mortgage debt to that person.
It is important to speak to the lender early on after the death, so that they can set out the options.
If the property is sold, then the mortgage will be repaid from the proceeds of sale.
Where there is a joint mortgage
When a property is held with someone else as joint tenants, then the property and the mortgage will automatically pass to that other person on the death of the other owner.
This means that they will be responsible for making the mortgage payments. If this is not possible, then the property may have to be sold to repay the debt.
If the property is held as tenants in common, then the situation can be more complicated as the deceased’s share of the property becomes part of their estate and will pass in accordance with the terms of their Will or the rules of intestacy.
If the remaining owner does not inherit the rest of the property, there may be an option for them to purchase it.
To prevent a tenant in common being forced to leave the property, it is possible for property owners to leave each other a life interest in their share of the home. This means that the surviving spouse or partner would be able to continue to live in the property after death of the other. Following the survivor’s death, the share of the property owned by the first to die would still pass in accordance with their Will.
It is particularly important to think about what you would like to happen to your property after your death if you have a mortgage over it. You need to consider whether others would be able to afford to take on the debt and, if not, how you can secure their future, for example, by leaving them a bequest or taking out a life insurance policy.