What Happens to Your Mortgage When You Pass Away?

When you secure a mortgage on your home, your focus is likely on settling down, planting some roots, and building a perfect home life. Thinking about what happens to your mortgage is probably the last thing that’s on your mind.

But while thinking about what happens to your home and your finances after you die is never easy, a mortgage is a big financial commitment, and homeowners come to worry about what happens to their property debt when they pass.

Questions about debt, probate, inheritance and responsibility can create a lot of stress and pose one very serious question: what happens to a mortgage when you die?

In this article, we take a comprehensive look at what happens to a mortgage after someone dies, including how lenders handle the account, what it means for joint owners, whether a mortgaged property can be inherited, and the options available to family members who need to deal with the payments. Let’s begin.

Does a Mortgage Get Written Off When the Homeowner Dies?

No, a mortgage will not simply be written off or disappear when the homeowner dies. This is because the debt will be linked to the property, not the person. As a result, the balance of debt will still need to be repaid, even if the homeowner has passed away.

But how does someone pay a debt after they have passed away?

It’s a fair question, and while it can feel strange to think about debt continuing after someone has died, the key point is that the responsibility moves to the estate rather than the individual.

Most commonly, this will be in the form of a sale, as the lender turns to the value of the home and the wider estate to recover what is owed. This process is routine for lenders and does not involve chasing family members for money they are not personally responsible for.

It’s important to note that beneficiaries can also be provided with the chance to clear the remaining mortgage, should they want to keep the property. This could be through savings, taking out a new mortgage in their own name, or using funds from the wider estate.

Crucially, lenders give families time to make these decisions, so relatives/beneficiaries are not expected to act immediately during an already difficult period.

In short: The lender will settle any balance through insurance, savings, or the sale or transfer of the property.

When people talk about what happens to a mortgage when someone dies, a lot of myths tend to circulate. Unfortunately, these can add unnecessary stress at a time when families are already dealing with a lot on their plate.

To help clear things up, our mortgage experts are here to debunk some of the most common misconceptions you might have heard:

Common
Myths

1. Myth: The mortgage is automatically cleared.

Truth: The mortgage stays with the property until it is repaid, most commonly through the sale of the property.

2. Myth: The lender immediately takes the home.

Truth: Lenders are not out to make an already difficult time harder. In most cases, they give families space to organise probate, gather documents, and decide how to handle the mortgage.

3. Myth: The next of kin must pay the mortgage from their own money.

Truth: The mortgage debt sits with the estate, not with any individual family member. This means the next of kin is not personally responsible for paying it.

If you’re unsure how a mortgage will be handled after a death, Boon Brokers can help you. As a fee-free, whole-of-market mortgage broker, our experts will provide personalised advice and support, no matter your circumstances.

What Happens to a Joint Mortgage if One Person Dies

What happens to a joint mortgage when someone dies depends on the type of ownership agreed when the mortgage was taken out. This will either be a joint tenancy agreement or a tenants in common agreement.

• Joint Tenancy Agreement

For those who agree to a joint tenancy agreement, it is common practice that the surviving borrower becomes responsible for the full mortgage. This means that the surviving partner will inherit 100% of both the deceased’s equity and debt.

As the mortgage debt will remain the same, the remaining partner will have to provide financial evidence to their chosen lender that they can afford the ongoing repayments as a sole borrower.

• Tenants in Common Agreement

In the case that the mortgage was secured as tenants in common, the deceased’s share of the equity and debt will depend on whether or not they left a will and their specific wishes for what happens to that share in the event of their death.

In the event that there is no will, ownership will be inherited by their closest living relative in accordance to the UK government’s rules on intestacy.

In most cases, the property will either be sold or the mortgage will need to be refinanced. This is because all property owners are required to be listed on the mortgage as a condition of the deed. Remortgaging ensures that the remaining owners are all legally responsible for the mortgage and that the lender recognises the new arrangement.

As a fee-free, whole-of-market broker, Boon Brokers can help you understand your situation and explain all of your mortgage options clearly. Whether you want to take over the mortgage, remortgage the property in your name, or sell to settle the debt, our dedicated mortgage experts can guide you step by step.

Can You Inherit a Property with a Mortgage?

Yes, it is possible to inherit a property, even if there is still a mortgage in place. While it is a common misconception that a property can only pass to beneficiaries after all debts are cleared, in reality, the mortgage stays attached to the property. As a result, this means anyone inheriting the home can consider how they deal with the remaining debt.

In the scenario that you are inheriting a property with a mortgage or taking ownership of an inherited property with a mortgage, there are typically two main options to consider:

• Refinance the property and securing a remortgage in your own name.

• Selling the property in order to pay off any remaining debt.

How you choose to manage the remaining debt will be wholly your decision, however, should you choose to refinance and secure a new mortgage in your name, your chosen lender will want to ensure that you’re financially capable of managing the new repayments.

As such, you will be subject to the traditional criteria and will be required to pass an affordability assessment before the lender approves your new mortgage. Should the lender determine that your current financial circumstances cannot cover the additional payments, the property may need to be sold so the remaining mortgage can be repaid. Any leftover proceeds from the sale would then go to the beneficiaries.

What Happens to the Mortgage If There Is No Will?

When someone dies without a will, it can add a layer of complication. Most importantly, the mortgage will not disappear, and the responsibility to repay the mortgage will pass to the estate.

If there is no will, the rules of intestacy determine who inherits the property and, in turn, how the remaining debt is managed. In the UK, this usually means the closest living relatives, such as a spouse or children, become entitled to the home.

Crucially, the mortgage must be addressed before ownership can be fully passed. As such, lenders may require the estate to continue making payments until a resolution is reached.

If the estate cannot cover the ongoing mortgage payments, the lender may require the property to be sold to settle the debt. It’s important to note that family members are not personally liable, unless they choose to take over the mortgage or remortgage in their own name.

Once the intestacy process finishes, the legal inheritor will then need to decide whether to refinance the mortgage into their name or sell the property in order to cover the remaining debt – as discussed before.

It is common for people in this situation to seek legal advice to help them understand all of their options, particularly their legal responsibilities regarding the mortgage.

Can a Family Member Take Over a Mortgage After Death?

Yes, while it is possible for a family member to take over, or ‘resume’, a mortgage after a loved one passes away, there is no obligation to do so. The mortgage remains the responsibility of the estate, not the family. Family members are not personally liable for the debt unless they choose to formally take over the mortgage or remortgage in their own name.

To outline exactly what family members can and cannot do, we have created a table below that summarises the main options, responsibilities, and considerations when dealing with a mortgage after a loved one’s death.

In short: The estate is the primary source for mortgage repayment, and lenders will work with executors to ensure payments continue while probate is processed.

For those who want to take over the mortgage, careful planning and communication with the lender is essential. Most of the time, refinancing in your name will often be the most straightforward way to secure the property and ensure the mortgage continues under your control.

At Boon Brokers, our dedicated mortgage advisers can help you ascertain your borrowing power and find you a mortgage that matches your unique needs. As a fee-free and whole-of-market mortgage broker, we will compare mortgage options across the market, helping you find the mortgage product that works for you.

What If No One Can Afford the Mortgage on an Inherited Property?

A mortgage is a massive financial commitment and sometimes, inheriting a property comes with a mortgage that the beneficiaries simply cannot afford to pay. While this can be a very stressful situation, it is not uncommon.

The key point to understand is that the existing mortgage debt will remain tied to the estate. As such, if the beneficiary cannot afford to remortgage the property into their own name, the lender will likely insist that the property is sold. The proceeds from the sale will then be used to cover any outstanding balance on the original mortgage. After all legal debts are cleared, the remaining proceeds will go to the beneficiary.

Can Life Insurance Be Used to Pay Off a Mortgage After Death?

Yes, life insurance can be used to help clear a mortgage after the borrower (and policy holder) passes away. When a valid policy is in place, the payout can settle the remaining balance so the family does not have to cover the repayments themselves.

It is common practice for many people to secure a form of life or mortgage protection insurance for this very reason, removing the thought of leaving your loved ones with added financial pressure at an already difficult time and helps loved ones remain in the home securely.

It’s crucial to understand that any life insurance payout depends entirely on the policy and its beneficiaries. Additionally, life insurance funds do not automatically go towards the mortgage, unless the policy is specifically assigned to the lender.

Generally speaking, most policies will not be assigned to a lender, and as such, the policy will be paid out to the named beneficiary on the policy. This does not need to be the next of kin or the same beneficiary of the estate. These fees can then be used at the discretion of the beneficiary.

With that said, the mortgage itself will still need to be repaid. Once again, this can be managed in one of two ways:

• The beneficiary of the estate may choose to remortgage the property.

Or

• The property can be sold to clear any outstanding debt.

In the case that life insurance is in place and is planned to be used to help pay off the remaining mortgage debt – whether a portion or the whole amount – it’s important for beneficiaries to notify the lender and follow the correct claims process.

Boon Brokers can help you choose the right protection for your mortgage with guidance that feels personal and reassuring. Our mortgage and insurance advisers take the time to understand your priorities, whether you want cover that protects the home itself or critical illness insurance that supports you and your family during difficult times.

Who Should You Contact About a Mortgage After a Death?

When someone passes away, the first few weeks can naturally feel very overwhelming. The last thing on your mind will be the desire to handle any financial concerns, let alone an estate or mortgage that is completely new to you.

Thankfully, managing a mortgage and knowing your options can be much simpler when you have the right people by your side.

At Boon Brokers, our dedicated mortgage advisers will take the time to listen to your specific situation, providing tailored mortgage advice that supports your needs.

Whether you want to explore refinancing, are hoping to better understand your affordability, or simply want some clarity on the next best steps you need to take – our team is here to help you.

As a fee-free, whole-of-market mortgage broker, we compare deals from more than 100+ UK lenders, stripping back the jargon to explain your options in plain English.

Need tailored advice on how to manage a mortgage?

Contact Boon Brokers today and let our dedicated mortgage experts support you.