What is a mortgage on an inherited property?

When you inherit a property, you will have to decide the future of that property. Inheriting a property is also an emotional time for most of us. At this point, you may be facing decisions about your beloved family home or property. Your mind may be wandering with different questions like selling, renting, or living in your parents’ house. On the logical front, you may be looking for answers like how do you put an inherited property in your name, what taxes you have to pay now, what to do about the mortgage on the property? and many more. Here, you will find the answers to all your questions. 


How to Apply for the mortgage on an inherited property?

First of all, please note that if you have just inherited a property, you don’t need to make an immediate decision regarding your inheritance. You don’t need to rush in your decision-making and you can thoroughly examine all the possible variables. You need to know that you can’t do anything with the property until the probate process is finished. So, the first step in remortgaging an inherited property is to apply for probate or a letter of administration. Probate means a process in which a Will is proved in a court of law and accepted as a valid and authentic document considered the final true testament of the deceased person. The probate period takes approximately six months to complete in which you make your decision regarding the inheritance. Assuming there aren’t any issues, It usually takes 4 to 8 weeks to get the grant of the probate.

In some cases where there is no valid Will to start, the process is called dying intestate. The property must be shared with certain rules, which are known as rules of intestacy. The main point to note here is that only married or civil partners and specific close relatives can inherit under these circumstances. 

There are several things that you need to consider when applying for a remortgage on inherited property, so its always better to contact a mortgage broker


Mortgages and inheritance tax

Inheritance tax is the first thing to consider if you have recently inherited a property through probate. It is worth noting that you may be required to pay the inheritance tax if you are inheriting a property over a certain value. The numbers here are very high; if you have an estate value of £325,000 (or up to £650,000 on the second death of a married/civil partnership couple), 40% of the tax will be charged. Additionally, you need to know that you cannot buy or be gifted your family’s house to save the inheritance tax liability. The similar rule of the £325,000 threshold applies if the respective parents are alive. To know more about the property value and complications with inheritance, you can contact “NeedingAdvice.co.uk Ltd”.


Other Factors related to remortgages an inherited property

There are other considerations you might want to know of mortgaging an inherited estate. We are going to discuss how the mortgage options are divided, what to do with the joint owner etc. The below article is divided into various possible scenarios. 

Inheriting a House with Siblings

When an estate or family home is shared between two individuals or owners, you will become a joint owner. There are two different types of joint ownership possible, termed as joint tenants and tenants in common. You will find different rules and regulations as a joint owner. The best thing is this scenario is to contact a specialist mortgage adviser who can guide you in the process. 


Inheriting a House with a Mortgage

When you get a property from your family with a mortgage in the United Kingdom, you solely become responsible for meeting the mortgage repayments. In some cases, the deceased person will have the life insurance policy, which could cover all the debt related to that estate. On the other hand, if the departed owner does not opt for any insurance policy or the current policy is not enough for paying all the repayments, you have are left with two options

  •  Sell the property and pay off the remaining mortgage.
  • Apply for a new mortgage in your name for the inherited property.


Inheriting a Buy-to-Let Property

If you have inherited a property with tenants, you have to decide what to do with these tenants. The first step would be to check the rental income and time of contract left from these tenants. If you are getting a better rental income, then you can draft a new contract in your name as the landlord. 

You will need to either move it into your name or remortgage it. Both options would lead you to the next process of passing the lender’s affordability test. You can also read our Guide to buy-to-let mortgages income requirements for in depth details.


 Selling Inherited Property

Selling the inherited estate is always available, but it is also an emotional decision to make for some people. The principal thing to note here is that you have to pay capital gains tax while selling an inheritance. As most of the properties increased in value with time, the capital gain tax is due on the profit. Capital Gains Tax is required at 18% on profits from any residential building if you are a basic-rate income taxpayer. It is also worth noting that if you have moved into the building and living there as your prime residence, the capital gains tax won’t be due when you plan to sell it. 


Next Steps

After your loved one passes away, arranging a mortgage would be the last thing that anyone thinks about. As a specialist brokerage firm, we are here to guide you about the type of remortgage that suits you, the best mortgage deal, the most affordable mortgage rate, and also starting a mortgage application for you. Make an online enquiry or call us the 07912076990 and speak to our financial advisor today. 


Remortgages on Inherited Properties FAQ

Can I get a buy-to-let mortgage on my inherited estate?

Yes, under the right circumstances, you can start your application. 

What is the value of a home for probate?

During the probate period, the value of the building is based on the open market value. 

How do I buy a probate estate?

The estate agents mostly handle probate possession; you can contact the agent or the seller if you know him personally. 

Why Should an individual Mortgage a House in Probate?

There are various reasons; the person may be a benefactor interested in replacing the present mortgage which is not in his/her name, raise some capital on mortgage-free possession or interested in using the mortgage to buy a new estate that is being sold in probate.

How long does probate take?

Probate may take six months, depending on complications in the process.

What if I want to keep my mortgage?

Yes, you can keep the mortgage on yourself, but the new borrower needs to consult a mortgage advisor.

What is the affordability test?

The test where specialist lenders check if you can afford to pay the mortgage with the current mortgage rate and increase interest rates.