Published 16 September 2020 · Last reviewed 17 September 2020 · Older article — see current rates
Writing a Will for Mortgaged Property either residential or investment
Writing a Will for Mortgaged Property is really a good idea, but it’s easy to put it off, and can result in avoidable tax on death and additional hardship and burdens for family members.
A mortgage can be a large debt left to your estate, so it really does make sense for Writing a Will for Mortgaged Property. A Will gives you a choice to dictate who looks after your affairs on death, including the mortgage. The title given to the person(s) you choose is “Executor” or the female equivalent “Executrix”. The Executor needs to at least 18 years old, financially component and can fulfil the duty at a stressful time. Therefore you may decide whether your partner or close family could deal with this extra burden in the immediate aftermath of a death. Therefore Wills for mortgages should be given serious consideration.
Importantly Writing a Will for Mortgaged Property can be used to determine the beneficiaries of the property.
Mortgage in one persons’ name
There could be a variety of reasons why you buy a property in a single name. Here are a few:
- You may not have a partner or be at the stage you want to commit.
- The deposit might be being provided from one side of the family and they want the asset to remain the same.
- Your partner may have credit issues, not be a UK resident or have another complication.
- You could be a first time buyer and benefit from a Stamp Duty reduction or have access to a greater number of mortgage products.
- In the case of a buy-to-let, the income bracket may be more favourable.
Ever thought what happens to the mortgage / property when you die? You should and Wills for mortgages could lay out the path that you want to be taken.
For example, you might want any of the following events to happen and your directions could be laid out when writing a Will for Mortgaged Property:
- Your partner to continue to live in or benefit from the property?
- The property to be left to your children or certain child? May be they reach a certain age.
- The property to be sold?
- The property to be kept and let?
- A brother or sister to be the beneficiary or even a best friend.
Here is a scenario to illustrate how plans laid out in a Will for Mortgaged Property can achieve a Father’s legacy dream:
Father has 3 buy-to-lets and 3 children. He does not want his life insurance proceeds or properties to go to his wife. Instead he wants his life insurance to be used to clear the mortgages on death and for the properties to be held on trust to his children when they reach their respective 25th birthdays. In the meantime he wants them to be let to accumulate funds for their university education.
Wills for mortgages can provide the legal framework to make his wish come true.
Mortgage in Joint names
Wills for mortgages in the case of a couple may be less important. There is a legal mechanism outside of Wills for mortgages called “joint tenancy” whereby the property passes straight to the other title holder in the event of death. This will be normally be dealt with by your Solicitor after Mortgage Offer before Completion but can be amended at Land Registry after the property has been bought.
Joint tenancy is however very inflexible “one size fits all” approach, unlike a Will for mortgages that has been set up on “tenants in common” basis, for example:
Shares. The property can be divided into shares and allocated to each of the joint life mortgage holders to do as they please with on death.
Scenario 1, Bill and Wendy are on their second long term relationship and have decided a buy a property together on a 50%/50% tenants in common basis. Bill has one child from a previous marriage. On Bill’s death the Will for mortgages directs that his 50% share goes to his child rather than Wendy. His fear otherwise on a joint tenancy basis Wendy would own 100% and his child would never see the benefit.
Scenario 2, Anil and Sandi are buying their first home. Anil’s parents are contributing the majority of the deposit. Sandi therefore agrees she will be a 33% share owner.
Tax Planning. Writing a Will for Mortgaged Property can also be used for tax planning purposes. To minimise Inheritance Tax or perhaps reduce the “means testing” assessment for the survivor.
Important: also if you are the last survivor of a Joint Mortgage you encounter the same issues as the Single Life section above.
HOW DO YOU DRAFT A WILL
Niche Advice is a Mortgage Broker and always recommends writing a Will for Mortgaged Property. We have teamed up with a number of professional Will Writing Firms nationwide who are Members of the Society of Will Writers or other reputable trade bodies to offer will writing and estate planning services.
If you would like us to put you in touch with the National firm we use please click on the below enquiry form.
Resource links to reputable trade bodies in the will writing services arena.