Death of a Joint Owner With a Mortgage

Year Published: 2020

If you own a property with other people, the way you own it together will be important no more so when one of the owners dies. If there is a mortgage on the property, further complications may arise as to who takes over the debt.

A property can be owned jointly – either as joint tenants or tenants in common. If it is owned as joint tenants, and one of the tenants dies, the right of survivorship applies and the survivors inherit the property. This is the case even if the deceased owner made a Will. Alternatively, if the property is owned as tenants in common, the share of the property owned by the person who died will pass to their estate and be dealt with either under the terms of their Will, if they have one, or under the intestacy rules if not.

What Happens to the Mortgage If a Joint Owner Dies?

If there was a mortgage on a jointly owned house, this is often taken out in the joint names of the owners. The effect of a death on the mortgage will depend on how the mortgage was set up. If it was taken out jointly, the deceased’s liability may end on death and the whole debt passes to the survivor. If they took it out on a joint and several liability basis, the deceased’s share passes to their estate and the survivor retains their share of the debt.

Care needs to be taken if the house was owned as joint tenants as on death the property passes automatically to the survivor. However, the mortgage debt may not pass to the survivor on the same basis.

Often, there is a life policy which could pay out to cover the mortgage debt, but if there is no such cover in place, the people dealing with the deceased’s estate would need to be careful before distributing the estate until the mortgage arrangements have been reviewed. The house would no longer belong to the estate but the deceased’s share of the mortgage debt would. If there is no life policy and there are insufficient cash monies in the estate to pay off the deceased’s share of the mortgage, then this could cause problems. The executors dealing with the estate will want to ensure that the mortgage company release the estate from the debt and arrange for the survivor to continue making the mortgage payments.

Legal advice would need to be taken if this situation arises, especially if there is a risk that the property will have to be sold.

If you would like further guidance on dealing with the death of a joint owner with a mortgage, please contact Helen Gowin on 01260 282351 or email [email protected].

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