Inheriting a house with a mortgage

• When inheriting a house with a mortgage, the debt and interest keep being charged against the property and must be dealt with as part of probate. 
• There are many ways for an estate to handle a mortgage, including paying it off in full by selling the property, but this can take time to work out and can only happen after probate is granted.
• Provira’s Estate Advance lets executors access up to 50% of the net value of the estate to cover urgent expenses such as a mortgage.

When inheriting a house with a mortgage, the mortgage will be considered a debt of the estate, it doesn’t disappear. 

Many lenders offer a grace period where payments are put on pause while the estate applies for probate, but interest will still be charged on the outstanding balance. 

And when probate can take months if not years to be granted, this can start to add up.

At Provira, we know the pressure this can place on executors. That’s why we’re so proud our Estate Advance can offer a simple, low cost solution to help executors pay off estate expenses and move forward with confidence. 

With our loan you:

• Can access up to 50% of the net value of the estate, often within days
• Only pay simple interest, not compound interest, saving you money in the long run
• Won’t be charged early repayment fees if everything wraps up sooner than expected
• Don’t have to provide monthly instalments. Instead, the loan is repaid in full once funds are released
• Won’t face any personal liability
• Will have a supportive member of our team dedicated to your case to guide you through it from start to finish

To get started, reach out to us today.

What happens to a house with a mortgage when someone dies?

A house with a mortgage becomes the responsibility of the estate after a person dies, and a specific process needs to be followed.

1. Let the lender know. 

The executor must inform the mortgage lender about the death and that they have assumed responsibility for the estate.

1. Discuss what will happen to the mortgage payments. 

Many lenders offer a grace period on monthly payments until probate is granted, but interest usually continues to be charged.

1. Confirm future plans with beneficiaries. 

This includes whether the estate will pay off the debt, if it can, or whether it will be inherited with the debt attached. If the latter, the beneficiary needs to meet the criteria of the mortgage. 

Although payments may temporarily pause, as the mortgage becomes a debt of the estate, it must be addressed, and a plan put in place to cover it. 

Who pays the mortgage during probate?

During probate mortgage payments are usually paid from the deceased’s estate by the executor.

If there’s a surviving joint borrower, usually a spouse, the responsibility would be passed along to them to continue the payments themselves. 

If there’s no joint borrower and the estate doesn’t have the cash to cover payments, executors can be left needing to raise funds before probate is complete. 

And as property can’t be sold until after probate is granted, this kind of cost, alongside Inheritance Tax, legal fees and other estate expenses, can become a significant burden for executors to navigate.

This is why Provira’s Estate Advance can provide such a lifeline for executors by providing access to up to 50% of the net value of the estate within days.

When you take out our loan your costs are kept low through only being charged simple interest, not compound interest, not facing any early repayment fees if everything wraps up sooner than expected, and not having to provide monthly repayments. 

Instead, the loan is simply repaid in full once the estate is settled and funds are released. 

Learn more about our Estate Advance here.

Can you inherit a house with a mortgage?

Yes, you can inherit a house with a mortgage. And the mortgage can be handled in any of the following ways:

• Repaid in full by selling the property

If the property is sold, the outstanding mortgage will normally be repaid from the sale before the remaining amount can be distributed to beneficiaries.

• Paid off using cash from estate funds

If there is accessible cash, savings or a life or mortgage-protection policy that can cover the balance, it can be paid off straight away.

Alternatively, executors may choose to take out an Estate Advance in order to pay off the remaining mortgage.

• Taken on by a beneficiary who wants to keep the property

This is subject to a credit check by the lender, but a beneficiary can opt to take on the mortgage payments themselves. It’s not an automatic switch and the beneficiary must meet all the criteria of the mortgage. 

• Taken over by a surviving joint borrower

Joint tenants, usually a surviving spouse or partner, take over a mortgage as part of the survivorship rules of inheritance, outside of probate and the will. If the property was held as tenants in common, only the deceased’s share of the house enters the estate but liability for the entire cost of the mortgage must be taken on.

Does a mortgage reduce Inheritance Tax?

In theory, yes. A mortgage does reduce Inheritance Tax as the debt is deducted from the full estate value, bringing down the value of the estate.

The amount that will then be liable for IHT is determined by HMRC. We lay out the most recent thresholds here.

Even without the mortgage included in the estate value, an Inheritance Tax bill still has to be paid within six months of death, before probate can be granted. 

And if the estate doesn’t have the cash to cover it, it can place a heavy weight on an executor’s shoulders.

Luckily, our Estate Advance, or Inheritance Tax Loan, can help. 

Our loan provides executors with up to 50% of the net value of the estate within days. We also require no personal liability, only charge simple interest, not compound interest, and don’t ask for monthly repayments. We’re simply repaid in full once the estate funds have been released.

To start your application, fill out our form today.

How long does it take to inherit a house with a mortgage?

The time it takes to inherit a house with a mortgage is entirely dependent on how long it takes for an estate to be granted probate.

The average probate timeline is around nine months, but for estates where there’s foreign property, investments and complicated assets, it can take much longer.

During this time, estates have numerous costs to cover. These can include anything from a mortgage payment to legal fees and an Inheritance Tax bill.

The challenge comes when an estate doesn’t have accessible cash and assets can’t be sold to raise funds until probate is complete. For executors, it can feel like a catch 22.

For estates containing a house with a mortgage, interest keeps accruing the longer probate goes on for, meaning the total amount eventually owed on the mortgage will keep getting higher. 

How can an Estate Advance help when inheriting a house with a mortgage?

Inheriting a house with a mortgage doesn’t have to prove a financial challenge for an estate. 

As outlined above, an estate has options when it comes to covering the cost of a mortgage and working out next steps.

And one of the most simple is the option of external financing. 

At Provira, we know the pressure put on an executor can be extremely stressful, particularly when you’re grieving. 

This is where our Estate Advance can help.

By taking out our loan you:

• Will be able to access up to 50% of your inheritance within days.
• Only pay simple interest, not compound interest, saving you money in the long run.
• Won’t face early repayment fees if probate completes sooner than anticipated.
• Don’t have to worry about monthly repayments. The loan is simply repaid in full directly from the estate once funds have been released.
• Benefit from a dedicated underwriter assigned to your case to guide you through it from start to finish.

Our supportive, compassionate team is on hand for any question, big or small, to guide you through every step of the way. 

Ready to start your application? Fill out our form today.