What happens with a mortgage on death
Discussion
Here's the situation:
My Father in law has recently died (friday, to be precise). He had a mortgage on his house, taken out when he divorced my MiL to pay for her half. It's an interest only mortgage, and there is no life insurance policy in place to cover it. I'd expect that goven current housing market woes the mortgage probably sits at about 60% LTV.
His two other daughters are living in the house, and have been paying him a fairly tokenish level of rent without a formal agreement in place.
What will happen now he has passed away? Will the bank move to repossess the house and auction it off? My wife and i want to avoid a fire-sale where the two daughters get chucked out and a load of the equity is lost. We will abe getting formal legal advice, but it will be several days before that can happen an i want to put her mind at ease.
My Father in law has recently died (friday, to be precise). He had a mortgage on his house, taken out when he divorced my MiL to pay for her half. It's an interest only mortgage, and there is no life insurance policy in place to cover it. I'd expect that goven current housing market woes the mortgage probably sits at about 60% LTV.
His two other daughters are living in the house, and have been paying him a fairly tokenish level of rent without a formal agreement in place.
What will happen now he has passed away? Will the bank move to repossess the house and auction it off? My wife and i want to avoid a fire-sale where the two daughters get chucked out and a load of the equity is lost. We will abe getting formal legal advice, but it will be several days before that can happen an i want to put her mind at ease.
The bank will want the mortgage repaid or remortgaged by the daughters in joint names (presuming they now own the property)- if that isn't possible, they normally allow a reasonable time to effect a sale and may even role-up the mortgage payments if the estate has insuficient cashflow.
David
David
There is no will, the mother was divorced about 5 years ago and that was all settled (as far as i know), so my understanding is that the 3 daughters own the estate. Good to know lenders handle these things sensibly - the option of remortgaging in the name of the three sisters could be tricky as 1 of them has no reliable income, and while the other does i doubt that a bank would touch her with a bargepole. However, that may be the best option if it can work somehow as the house needs rennovation (it's a bit of a state) so won't fetch a good price at the moment.
You have a possible catch 22 coming there then. The bank will want all registered owners also to be the mortgage holders, and for them each to be severally liable. This leaves your Mrs very exposed if the other two sisters are financially unreliable.
The ladies need to separate out ownership, mortgage holders, responsibility for repayment, usage and rental, and responsibility for upkeep. Each of these things is independent, and results in a payment or receipt, all of which can be netted into a single monthly transaction. And write each relationship and proportions of responsibility and first refusal rights down in a proper agreement.
The ladies need to separate out ownership, mortgage holders, responsibility for repayment, usage and rental, and responsibility for upkeep. Each of these things is independent, and results in a payment or receipt, all of which can be netted into a single monthly transaction. And write each relationship and proportions of responsibility and first refusal rights down in a proper agreement.
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