Do you own property with a mortgage over it?
What happens if you die before paying off the mortgage?
Picture this: You bought a house on your own in your young, single days and took out a mortgage. You have recently married the woman of your dreams. However, you are now having concerns as you want to ensure she gets the property and gets to keep living in the property if you were to suddenly die. So, what do you do?
Make a Will
You could have a solicitor draw up a will leaving the property to her in the event of your death.
But what about the mortgage?
You can give property to someone in your will subject to or excluding the mortgage. If you don’t won’t the property to be sold to pay off the mortgage, you need to express such intention in your will. If not, there is a presumption that the mortgaged property will be liable for the payment of the mortgage.
However, if there are insufficient funds in the estate to pay off the mortgage, two things may need to happen:
- The property may need to be sold to pay off the mortgage; or
- Your spouse may need to apply for a new loan herself to pay off the original mortgage.
Pros: Less complicated and less expense now. It is as simple as giving instructions to your solicitor and paying for the cost of a will.
Cons: It could cost your estate more by having to transfer the property into your executor’s or spouses’ name upon your death. If this property is your only major asset, your estate could incur the cost of applying for a grant of probate just to transfer the property to your spouse. Your property will not automatically go to your spouse. It will form part of your estate and therefore, is open to claims against it. This means less protection and less peace of mind that the property will go to her.
Transfer the Property into Joint Names Now
You could organise for the property to be transferred into both of your names as joint tenants. This would mean that you both own the property equally.
Before you can transfer the property ownership, it is likely you will need to organise for a new loan with her included as a mortgagor/borrower. You would need to complete this step first before transferring the title to the property.
Pros: if you both own the property as joint tenants, under the right of survivorship, the property will automatically go to your spouse upon your death and will not form part of your estate.
Cons: This avenue involves more work and cost now rather than later.
What happens if I don’t make a Will and don’t transfer the property into both our names now?
Your estate will get distributed in accordance with the laws of intestacy. This means the law decides who gets what from your estate upon your death – including your property.
This might not be what you want to happen in the event of your death. Therefore, it is important to speak to a solicitor to work out what might be the best course of action in your circumstances.
If you have a property with a mortgage over it and have been concerned about whether your spouse we be able to keep the property, you can contact our office for advice. We can assist you in making a will, transferring property ownership or advising you on what could happen to your estate if you passed away without a will.