• March 29, 2024
 Outstanding mortgage left by deceased – what would you advise?

Outstanding mortgage left by deceased – what would you advise?

This is Money have recently reported a probate case whereby a member of the public wrote in asking for assistance. Advice was provided by both a representative of the publication, as well as a practicing solicitor. Do you agree with the guidance given in this instance? Are there other points that need to be considered?

The person’s deceased mother had a mortgage and they needed to know whether the mortgage company has rights to demand payment. The lender was advised the outstanding mortgage balance will be covered once the house is sold — which had been placed on the market.

The person who wrote in asked if they had any legal rights. As a wills and probate professional, what would you have advised?

This is Money recommended the person could handle the probate themselves, use the services of a legal representative, or contact the executor of their mother’s will. Out of these options, they recommend having a solicitor who will be able to handle the estate.

Mills & Reeves solicitor, Vikki Risk, advises that as there has been a death, no payments can be made on the property until a grant of representation appointed. She notes this is required by law and allows a deceased person’s estate to be handled by a representative, rather than be the burden of the grieving relative.

According to Risk, if there is no inheritance tax (IHT) to pay then probate will take an average of 2 to 3 months, with this timescale nearly doubling should IHT be applicable (14-16 weeks). Is this in line with the typical timescales you advise your clients?

If there is no life insurance policy applied, Risk recommends checking mortgage terms and conditions, as this often states what will happen in the event of death. You will need to ensure your clients are aware of this, as there may be stipulations or processes in place to help protect those involved.

Risk confirms the person’s thoughts that it is acceptable to pay the mortgage off once the property is sold. The gained amount from the sale is usually enough to cover the remaining balance, says Risk. However, she raises the issue of other outgoings, including bills and utilities. This is something a bank expects consumers to handle and Risk says other assets could be used for this.

This wider scope of outstanding balances is one of the key areas of probate that professionals must handle with due diligence, as these details can have a great effect on the financial impact on any beneficiaries, or grieving family members as in this case.

Clients shouldn’t feel pressured to be able to afford mortgage repayments, whether possible or not. If the client or a legal representative liaise with the bank or mortgage lender, the terms of the loan can be negotiated, says Risk. Lenders tend to understand the circumstances and are prepared to wait until the house is sold.

Risk advises it is important for the mortgage lenders to be kept up to date throughout the probate process and if the sale price doesn’t cover the remaining balance, then the excess is payable from other assets within the estate.

Are there other ways this case can be handled? Please provide advice and suggestions in the comments section below.

Heather Cameron