What happens to my mortgage if I die?

The passing of a loved one is bad enough, but dealing with their financial affairs can make it even more difficult, particularly if your home is involved. If someone dies with a mortgage the debt unfortunately still needs to be repaid, and that responsibility will normally fall to those left behind.

Here we take a look at what happens to the mortgage when you or someone you love passes away, helping you feel a little more prepared should the worst happen.

Tell the mortgage lender

It’s important to advise the mortgage lender of the death as quickly as possible. Don’t be afraid to contact them – providers will have a lot of experience in helping people in this situation and will have clear procedures in place. They will understand that this is a distressing time for you and will do their best to help you deal with what happens next.

The lender will typically require a certified copy of the death certificate, which can normally be taken into a branch or sent by post. They’ll let you know when they need this by, and how you can get it to them, when you initially contact them.

Repaying a mortgage when a borrower dies

When a borrower dies the mortgage will still need to be repaid. This will be dealt with by the administrator or executor of the estate and will ideally be achieved by using any life insurance or mortgage protection policies, or any other assets that can be used for this purpose (such as savings, stocks & shares or investments). If the payouts aren’t sufficient the property may ultimately have to be sold.

What happens to a joint mortgage if my partner dies?

If you have a joint mortgage and your partner dies before this is paid off, you will be liable for any outstanding mortgage debt. If your partner’s estate, death in service entitlement or life insurance payout does not cover this amount then you will need to continue making repayments yourself. If this is going to be difficult, you will need to speak with your mortgage lender and see if they can offer any alternatives.

This may include extending your mortgage term, switching to an interest-only or a retirement interest-only mortgage (depending on your age), or even completely remortgaging – potentially to a new provider if they can offer a better deal.

Alternatively, if you’re over 55, you may want to consider using equity release to clear your outstanding mortgage, or you could perhaps think about downsizing and using the proceeds of the sale to repay the debt.

Can I pay off a joint mortgage without probate?

Provided the property was owned under a joint tenancy arrangement, there’s no need to wait for probate as you’ll automatically inherit your partner’s share of the property. This means you’ll be able to repay it straight away should you wish, though you’ll likely still need to wait for any insurance payments to come through, and most lenders would grant a payment holiday in this kind of situation.

However, if it’s a tenants-in-common arrangement, things can be a little more complicated. In this case ownership – and therefore repayment obligations – will fall to whoever has been left the deceased’s share in their will, and probate will likely be needed.

What happens if my partner dies and I’m not on the mortgage?

Unfortunately, the same basic rule applies even if your partner dies and you’re not on the mortgage – the debt still needs to be repaid, and as the surviving partner you’ll need to make sure this can be achieved, particularly if you want to continue living in the property.

However, your partner would ideally still have had a suitable life insurance policy which could be used to pay off the remainder of the mortgage, or if they had other investments, assets or death in service benefits from their employment, then this would hopefully provide enough funds to settle the outstanding mortgage debt.

But if there is no life insurance in place, or the sums are not enough to settle the outstanding mortgage debt, then it is possible that the property will have to be sold to pay off the monies owed.

The surviving partner could take out a new mortgage in their own name in order to do this, but it is not possible for them to simply assume or take over an existing UK residential mortgage – it will be treated like a new mortgage application, and they’ll need to show they have the necessary income and can pass the usual mortgage affordability tests before they can buy the property.

As with any new mortgage, it’s important to shop around to find the best deal, in which case our whole of market mortgage comparison tables can help.

Do I need to make a will if I have a mortgage?

There is no legal requirement to have a will once you have a mortgage. However, having one means that your estate is managed in line with your wishes, which could make things a lot less stressful for your loved ones when the time comes.

There are several ways you can make a will, including using a solicitor, estate planner or a will writing service. Remember though that it may not be a one-time job – having made a will, it’s important that it continues to reflect your wishes, so if you remarry, divorce or your family circumstances change, you should update your will accordingly.

How life insurance could help

There’s no legal requirement to have life insurance for a mortgage, but having an appropriate policy in place can help make sure that your mortgage is paid off should you die. If you didn’t, then your family, or those managing your estate, may be forced to sell the property to repay the debt.

Types of life insurance policy to clear the mortgage

There are two basic types of life insurance which can be used to settle the outstanding balance on your mortgage in the event of your death: decreasing and level term.

Decreasing term life insurance considers the fact that if you have a repayment mortgage, the longer you live, the less you will eventually have to pay off, as the balance reduces over time. Hence, the sum required will similarly decrease to match the amount left on your mortgage. This means that if you pass before the mortgage is repaid, the payout should cover whatever is left, but is unlikely to leave any additional funds for your next of kin.

Level term life insurance, on the other hand, stays at a constant level throughout the lifetime of the policy. This is required for interest-only mortgages that do not reduce over time, but with a repayment mortgage, the longer the life insurance runs, the less is required to settle your outstanding mortgage debt if you die. This means that unless you die very soon after taking out this kind of life insurance, there will be a steadily increasing sum left over – once your mortgage is repaid – to benefit those you leave behind.

If your partner had life insurance, usually the mortgage is cleared

If the deceased party had an appropriate level of life insurance, then this is often used to pay off the mortgage in its entirety, leaving the surviving partner with no debt and a house that is now entirely theirs. For many people, this is the primary reason for having life insurance.

Can I take over my parents’ mortgage?

Potentially, though even if you’re inheriting your parents’ property, you’ll still need to make sure the mortgage can be repaid. This may still be achievable if there are any insurance policies, investments or similar assets from which to draw upon, or you might find you need to apply for a new mortgage in order to have the property in your name.

However, you’ll need to go through the usual application process and will need to prove that you can afford the repayments. If it’s too much of a financial commitment you may need to sell the property, and lenders can even force a sale if they need to recover the balance.

What happens to a buy-to-let mortgage if a landlord dies?

The basics are similar to a residential mortgage, in that the property will pass to the surviving spouse or whomever is named the beneficiary in the will, who will then be responsible for repaying the mortgage. If they wish to keep the property they’ll likely need to apply for a buy-to-let mortgage and arrange a tenancy agreement in their own name.

However, the tax rules around both inheriting a buy-to-let property and becoming a landlord can be complex, so it’s important to make sure you fully understand any financial implications of the property you’re taking on. Always seek independent advice and speak to a qualified broker who can help you navigate the area.

Where can I go for help and financial advice following the death of a partner?

There are several places which can offer you help and support if you’re experiencing problems paying for your mortgage. The first of these should always be your lender, however, you can find additional help and advice at:

• Citizens Advice – Visit their website or pop into your local CAB centre
• MoneyHelper – Free and impartial advice from an official Government website