Whether you’ve inherited a property automatically as part of a joint tenancy, or have had it passed down to you by a deceased relative in a Will, you’ll know that taking control of someone else’s home can be a testing time.
A property will often be the highest value asset in an estate, and it is relatively common for people to receive a property that still has a mortgage payable on it. This can often happen when older homeowners re-mortgage their home in later years in order to supplement their pension and pay for living costs.
Here’s what you need to know if you’ve inherited a house with a mortgage:
It’s your responsibility
During probate, if you’re named in the Will as the inheritor of a property you, unless specifically stated, will take on responsibility for the asset.
As a result, if there is a mortgage which remains unpaid on the property, you will be responsible for making payments – even if you don’t live there. If you don’t repay the mortgage then there’s a chance that you could lose the property.
There’s no legal obligation
However, it is important to note that there is no legal obligation to continue making mortgage payments for a property.
If the property is in negative equity or you’ve no means of making repayments, you can’t be forced to repay the mortgage. In this situation, it is well worth talking to a solicitor as well as the mortgage provider to stand a better chance of finalising the situation in a way that suits you.
Check the will
Occasionally, the deceased will dictate in their Will that the mortgage shouldn’t be paid off by the property’s new owner and should be repaid through the sale of other assets in the estate.
If you decide to the let the property out, you’ll have to arrange a new buy-to-let mortgage. Any profit that you make from the profit will also have to be declared and taxed.
A mortgage doesn’t count when calculating tax liabilities
Inheritance tax is only calculated on the net inheritance, so if you have a section of the property that remains payable on a mortgage, you won’t have to regard that as part of the estate. So deduct the amount of the mortgage from the value of the property.
Speak to Howells today
At Howells, we specialise in helping individuals and families deal with probate cases. If you’ve a question about inheritance, and how it could affect your situation, speak to us today. Enquire above, email email@example.com or call 02920 404034 today.
by Clarissa Landcastle
(Image: Jakeliefer under CC BY 2.0)