A death in a 3 way mortgage.

(11 Posts)
PASStheCAKEandCHOC Fri 04-Jun-21 10:46:38

Trying to get advice for a friend. She shares a mortgage with 2 others. Doesn't live in the property.
Person a 50%
Person b 25%
Person v 25%

Person a passed away. Person b is her next of kin.

She's confused what happens to the house. It would need to be sold. Does she then get person a's part. Person a has been paying the full mortgage. B&C are only in mortgage as only way that perosn a could get mortgage.

OP’s posts: |
TakeYourFinalPosition Fri 04-Jun-21 10:50:25

I don’t think it matters who her next of kin is. Did person A have a will?

Essentially either her will or the interstate rules, if they died without one, will decide who owns person A’s portion.

sashagabadon Fri 04-Jun-21 10:51:47

Presumably depends on who a left their 50% of property to?
So if b then they now own 75% and c owns 25% as before.
Then b could sell it and give c 25% of sale price minus fees, taxes etc

Kerberos Fri 04-Jun-21 11:03:48

Not a lawyer but I'd think despite the mortgage situation, if person A has been paying the mortgage all this time, then ownership of the house morally is theirs (if not legally - not a lawyer)

So the full ownership of the house morally should pass to whoever is in the will from person A.

This assumes of course that your friend has made no financial contribution towards the house other than being on the mortgage. If they have this should be returned with interest.

This isn't the legal position but seems to me to be the fairest way of doing it.

Been thinking about this a lot as I have responsibility for the mortgage on my parents house. They've paid it every month so it feels right the house should be split between me and my siblings when they no longer need it.

Quartz2208 Fri 04-Jun-21 11:21:50

The mortgage isn’t important as much as the deeds and whether they were joint tenants or tenants in common and then what if there is a will that says

maxelly Fri 04-Jun-21 12:33:29

Forget the mortgage and who's been paying it, a mortgage is just a loan issued to the 3 people with the house as security, it doesn't really matter in terms of who gets what from the sale. Nor does 'next of kin' really, as others have said. What matters is (a) how was the house ownership set up, I assume the 3 people are tenants in common and own the house in the defined %s as per your OP and (b) did person A leave a will, and if not who inherits under intestacy laws (see here for UK rules intestacy

If there was a will leaving person A's share to person B and/or person B is entitled to inherit under intestacy laws, the house will be sold, the mortgage paid back first (watch out for any early repayment charges), and then the remaining equity after costs (legal fees, estate agent fees etc) will be divided 25% to person C and the remainder to B. If under A's will/intestacy the money goes to someone else, C will still get their 25%, B will also get 25% and the remainder to the 'someone else'.

B and/or C could always choose to gift their share of the equity to anyone else if they wanted to, and of course if person B/the mysterious 'someone else' can afford their own mortgage and wants to keep the house then this will be possible to sort out without having the formally sell the house on the open market...

PASStheCAKEandCHOC Fri 04-Jun-21 12:57:29

OK I'll pass on the info.
To be honest it's out of my depth! I only rent. So wouldn't have a clue about anything like that.

So if for example the house was 100k. But 60k if left on the mortgage. Does that get paid back then the 40k gets divided as per will if there is one?

OP’s posts: |

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maxelly Fri 04-Jun-21 13:14:20

Yes exactly that - if the house is sold, firsts costs have to be paid, then the mortgage company get paid back, then the remainder is distributed in %s as per the ownership (assuming the house was owned as tenants in common).

Say house is sold for £100k, and the costs of sale are £5k, and the mortgage is £55k, that leaves £40k equity to be divided. B and C both receive £10k each as their 25% shares. Then A's estate receives the remaining £20k, if he left this to B (or if B is entitled to it under intestacy laws) she then ends up with £30k total. But if A and B were for instance unmarried partners and there was no will, A's relatives might be entitled to that £20k. Or if A made a will leaving their estate to the donkey sanctuary then the donkeys get the money - B needs to find out whether there was a will and if not look into whether she's a close enough relative (if for instance they were married) to receive everything under intestacy. As a PP said B and C may then want to consider morally what were A's wishes, and if to all intents and purposes it was A's house that they never contributed financially to, they want might to gift their 25% shares to the donkey sanctuary or A's children or wherever A wanted their money to go, but that would be entirely a matter for them and their consciences, not the law. It might be worth involving a solicitor to make sure everything is sorted out properly?

Cloverforever Fri 04-Jun-21 13:18:47

There may be a life Insurance policy which would pay out if somebody dies which could pay off the mortgage.

Dyrne Fri 04-Jun-21 16:37:05

I disagree with other’s saying B and V morally aren’t entitled to any money.

Agreeing to be on the mortgage was a big financial risk for them - if A had defaulted at any point then B & V would have been pursued. In addition, by having a legal interest in this property they were potentially giving up any ability to benefit from First Time Buyers incentives (HTB etc); OR they could have ended up having to pay significantly more in stamp duty etc if buying a “second property”.

Agreeing to be named on someone’s mortgage isn’t just a tick box exercise.

Kerberos Sat 05-Jun-21 09:07:09

Dyrne

I disagree with other’s saying B and V morally aren’t entitled to any money.

Agreeing to be on the mortgage was a big financial risk for them - if A had defaulted at any point then B & V would have been pursued. In addition, by having a legal interest in this property they were potentially giving up any ability to benefit from First Time Buyers incentives (HTB etc); OR they could have ended up having to pay significantly more in stamp duty etc if buying a “second property”.

Agreeing to be named on someone’s mortgage isn’t just a tick box exercise.

This is a fair point. Assuming the other mortgagees had been adversely affected then this would be the point to put that right.

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