Can your mortgaged home be repossessed after your death?

We recently had a client at risk of home repossession and was facing eviction from his home, due to mortgage arrears.

For us, this was an unusual situation as our client was not the borrower as his wife was and what made this even more unusual was that his wife had passed away and the lender was not made aware. It transpired that our client had for some 10 years, been paying his wife’s mortgage right up to and way after his wife had died.

The only reason the lender became aware that our client’s wife had died, was because the mortgage fell into arrears from situations arising from COVID.

Our client was not aware that he should have notified the lender that his wife (the borrower) had died and just kept paying the monthly payments. Once he was unable to meet the monthly payments, he started to receive letters from the lender asking what was going on and then when he didn’t reply to the letters, then came the letters threatening repossession and eviction, which was when he came to us seeking help.

In the UK, the fate of a mortgage upon the death of the borrower depends on various factors, including the type of mortgage and the existence of life insurance. 

In the case of joint mortgages, where more than one person is named on the mortgage agreement, the remaining borrower(s) typically assumes full responsibility for the mortgage upon the death of one of the joint borrowers. This means that the surviving co-borrower(s) must continue making the mortgage payments to avoid repossession or even worse, eviction.

For mortgages held solely by an individual, the situation can vary. If the borrower has life insurance that covers the outstanding mortgage amount, the insurance payout can be used to settle the debt upon their death. However, if there is no life insurance, the executor of the deceased’s estate is responsible for settling the mortgage from the deceased person’s assets.

When a mortgage borrower passes away, the ownership of the property does not automatically transfer to the mortgage lender. Instead, the property becomes part of the deceased person’s estate. The executor of the estate is responsible for managing the deceased’s assets, including the property and the associated mortgage.

If the deceased’s estate is insufficient to cover the outstanding mortgage, the lender may seek repayment from the sale of the property. If there are beneficiaries named in the deceased person’s will, they may inherit the property, but the mortgage debt must be settled before the property can be fully transferred.

Lenders may choose to work with the family or beneficiaries to find a suitable solution, such as refinancing the mortgage or selling the property with the lender’s cooperation. It is crucial to communicate with the lender and seek professional advice to navigate the process smoothly.

The legal process of settling an estate, known as probate, may influence the resolution of the mortgage. The probate process involves validating the deceased person’s will, determining the assets and liabilities of the estate, and distributing the remaining assets to beneficiaries.

Understanding the intricacies of how a mortgage in the UK becomes null and void upon the death of the borrower is crucial for both borrowers and their families. Proper financial planning, including life insurance and estate planning, can help alleviate the burden on loved ones and ensure a smoother transition of assets and liabilities. Consulting with legal and financial professionals is advisable to navigate this complex process.