When someone dies leaving property behind, the responsibility for dealing with it falls to the executors or administrators. But what happens if there is still a mortgage to pay or if the deceased had taken out an equity release loan? Navigating these issues requires particular care, particularly when family members are grieving and may be unsure of their legal duties.
Getting this right is crucial, not just for executors, but also for beneficiaries who may be relying on the sale of the property as part of their inheritance.
‘Some clients are surprised to learn that mortgages do not simply disappear when someone dies,’ comments Kiran Solanki Solcitor at Crane and Walton Solicitors LLP. ‘Whether it is a standard repayment mortgage or a more complex equity release scheme, the personal representatives need to act quickly and carefully to protect the estate and avoid unnecessary interest or penalties.’
Mortgages and probate – the basics
If the deceased owned a property with a mortgage, the loan does not end on death. It becomes a liability of the estate. This means the executor or administrator must ensure the lender continues to receive payments – or agrees to hold off receiving payments – until the property is sold or the estate has sufficient funds to repay the debt.
In most cases, the mortgage will be repaid from the proceeds of sale. However, where beneficiaries want to keep the property, they may need to remortgage in their own name or repay the loan using other assets once a grant of probate has been obtained.
It is essential to notify the mortgage lender promptly after the death, and to obtain up-to-date redemption figures to calculate what is owed. Accurate knowledge of the redemption figure must be maintained throughout the administration, particularly where a sale or transfer of the property is imminent.
Equity release – what makes it different?
Equity release loans are often more complex. These arrangements allow homeowners over a certain age to borrow money against the value of their home, and the loan will usually be repaid from the sale of the property after death.
Interest typically rolls up over time, meaning the amount owed can increase substantially. Some plans include early repayment charges or conditions affecting when and how the property must be sold.
Executors must liaise with the equity release provider, understand the terms of the loan, and check whether there are deadlines or restrictions on selling the property. Professional advice is often needed to avoid breaching the terms of the loan and incurring extra costs.
Valuing and selling the property
One of the first steps in the probate process is obtaining a formal valuation of the property. Even if no tax is ultimately payable, an accurate open market valuation as at the date of death is still required. It is also important to obtain the mortgage balance on the date of death, as this is treated as a liability and deducted from the estate for inheritance tax purposes.
If the property is to be sold, executors must ensure it is secure, insured, and well maintained.
This includes:
- arranging vacant property insurance, if required;
- securing keys and alarm codes;
- clearing out personal possessions;
- dealing with utility providers and local council tax; and
- selecting a reliable estate agent and solicitor to handle the sale.
Delays in selling can lead to increased mortgage interest costs, and this can affect the timing of distributions to beneficiaries.
Practical issues for executors
With a mortgaged property, executors must:
- identify all charges registered against the property;
- understand whether the estate can afford to keep the home, or if it must be sold;
- manage communications with lenders and comply with any deadlines;
- ensure debts are paid in the correct legal order; and
- consider the wishes of beneficiaries, especially where there are emotional ties to the property.
These duties can be time-consuming and legally sensitive. Executors are personally responsible for getting it right and may be held liable if they make mistakes.
Impact on beneficiaries
The existence of a mortgage or equity release plan will reduce the amount of money available for beneficiaries. In some cases, a property expected to be worth a substantial sum may be heavily encumbered by debt, leading to disappointment or even a dispute.
If a beneficiary hoped to inherit the home, they may need to explore whether they can afford to take over the loan or refinance. In family situations, especially between siblings, this can lead to disagreements that are difficult to resolve without legal input.
Clear communication, transparency, and good financial advice are key to avoiding problems.
How we can help
Dealing with a property after someone dies requires careful attention, particularly where mortgages or equity release plans are involved. Our experienced team can:
- advise you on your duties and legal responsibilities;
- liaise with mortgage and equity release providers;
- obtain property valuations for inheritance tax and probate;
- guide you through the sale or transfer process;
- help resolve disputes between beneficiaries; and
- ensure the estate is administered efficiently and correctly.
We understand the emotional and financial pressures involved. With practical advice and expert legal support, we will help you navigate this process with confidence and clarity.
For further information and assistance, please contact Crane and Walton Solicitors LLP in Coalville on 01530 834466. Crane and Walton LLP also has offices in Ashby, Leicester and Melbourne.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
