What Happens to My Mortgage if I Die?

When someone dies, their outstanding debts, including any mortgage, do not disappear. They become liabilities of the estate, to be paid from the deceased's assets before anything is distributed to beneficiaries. The executors are responsible for identifying the debt, notifying the mortgage lender, and deciding, often together with any beneficiaries who will inherit the property, how the debt will be dealt with.

In many cases the property is simply sold and the mortgage repaid from the proceeds before the balance is distributed. In other cases, particularly where a beneficiary wants to keep the property, they may need to pay off the mortgage from other funds, remortgage the property in their own name, or take over the existing mortgage if the lender agrees, subject to their own financial position being assessed.

If a mortgage is held jointly, for example between spouses or partners who own the property together, the surviving borrower usually remains fully responsible for the whole outstanding mortgage, not just half of it. This is because most joint mortgages make each borrower liable for the full debt rather than a proportionate share, similar to how joint bank accounts work.

This means that on the death of one joint borrower, the mortgage lender will generally expect the survivor to keep making the full repayments, and the property itself, if held as joint tenants, will usually have passed to the survivor automatically through the right of survivorship, alongside the ongoing mortgage obligation.

Many mortgages are supported by a life insurance policy or a specific mortgage protection policy, designed to pay off some or all of the outstanding balance if a borrower dies during the mortgage term. Where this cover is in place and up to date, it can clear the mortgage entirely, leaving the property free of debt for the beneficiaries or the surviving joint owner.

It is worth checking what cover you actually have and whether it is sufficient to clear the current mortgage balance, since policies taken out some years ago may no longer match the size of the outstanding loan, particularly if you have remortgaged or borrowed more since the policy began.

Under section 35 of the Administration of Estates Act 1925, a property that is subject to a mortgage normally passes to the beneficiary 'subject to' that mortgage, meaning the beneficiary inherits the property along with the responsibility for the outstanding debt, unless the will expressly says otherwise. This is sometimes described as the debt not being paid off automatically from the rest of the estate just because the property is left as a gift.

If you want your beneficiaries to inherit the property mortgage-free, your will needs to say clearly that the mortgage should be paid off from the rest of the estate before the property passes to them. Without that clear instruction, the default position under section 35 applies and the beneficiary receives the property together with the debt attached to it.

Review your mortgage protection or life insurance cover regularly, particularly after remortgaging or borrowing more, and check with your lender or adviser whether your current cover would actually clear the outstanding balance. Make sure your will reflects what you want to happen: whether a beneficiary inherits the property with the mortgage attached or free of it.

My Posh Will is an online guided will service for England and Wales that helps you record clear instructions about property and any associated debts. A single will costs £69 and mirror wills cost £89, both one-off payments with lifetime access, and most people finish in around ten minutes, with instructions on signing and witnessing included.