Dealing with mortgages and debt when someone dies

When somebody dies, their debts don't simply disappear, they are usually paid by the person’s estate before any assets are distributed to their beneficiaries.

If a loved one has passed away, it can be useful to understand what happens to their debts, including mortgage and credit cards. This guide will walk you through the steps you’ll need to take in order to deal with debt after death.

You’ll discover more about:  

• Mortgages
• Student loans
• Personal loans, car finance, overdrafts and other unsecured loans
• Store cards
• Utility bill arrears
• Secured loans
  
  

What happens to your mortgage when you die?

When someone dies, it’s important to make sure monthly payments on their mortgage can still be made. It is a good idea to notify the mortgage lender as quickly as possible. Each lender will have their own policies and procedures in place and will help to guide you through the next steps. They will usually want to see a copy of the death certificate.

Do I need to carry on paying the mortgage when someone dies?

Mortgage lenders will usually expect that the mortgage will be repaid. If the cost of the mortgage can’t be covered by the estate, or by life insurance policies, the lender can ask for the property to be sold in order to recoup the debt owed to them. However, many lenders will have their own bereavement team, who may be able to put repayments on hold until an executor has been appointed to deal with the estate.

What happens to a joint mortgage if one partner dies?

Joint mortgages are very common in the UK. The mortgage will usually be set up as either a ‘joint tenancy’ or a ‘tenancy in common’.

When one of the parties in a joint tenancy mortgage dies, the surviving party becomes liable for the mortgage debt. Your partner may have assets, life insurance or death in service benefits which will cover the debt. If not, the surviving partner must continue to make the mortgage repayments by themselves or can opt to refinance or remortgage the debt to reduce payments. As a last resort, it might be necessary to sell the property to clear the outstanding mortgage.

If the property is owned as a ‘tenancy in common’, the beneficiary of the deceased person’s share should be named in their will.

Can I transfer a mortgage if someone dies?

It is possible to transfer a mortgage into someone else’s name. However, they would need to apply for the mortgage and pass any eligibility requirements. If they are unable to get a new mortgage, then the property may need to be sold.

Who is liable for mortgage payments on inherited properties?

If you inherit a property, you’ll need to cover any outstanding debt. Lots of beneficiaries choose to sell the property they inherit as they cannot fund the monthly mortgage payments. Some are able to pay off the remaining loan if it is nearly paid off when their loved one passed, while others may re-mortgage in order to keep the property.

What happens to debt when you die?

If you’re wondering “does debt get passed on?”, or you’re concerned about the debt of a loved one who has passed, the section below will help you understand what to do next.

How to pay off the debt of a deceased person

It’s important to pay off your loved one’s outstanding debts in order of priority once you have the Grant of Representation:

• Secured debts including mortgage
• Funeral expenses
• Unsecured debts including credit cards

In some cases, you might need to sell the deceased’s assets to settle any secured debts. Typical assets you can sell are property, vehicles and valuables, such as antiques.

Once all debts are paid, any remaining assets can be distributed to the beneficiaries who have been named in the will. If the deceased didn’t leave a will, the rules of intestacy apply:

• No will = estate is distributed to the surviving spouse or children
• No spouse/children = estate is distributed to the parents or siblings of the deceased

Liability for dealing with the deceased's estate

The individual responsible for managing the deceased’s estate takes full responsibility for any mistakes that are made. For example, if a creditor asks you for the money you have distributed to beneficiaries, you may have to fund the bill yourself. Solicitors will be able to advise you on this process.

Dealing with different types of debt after death

What happens to your credit card when you die?

The person who is responsible for dealing with the estate must find out exactly which debts the deceased owed, and if these debts were in an individual name or a joint name with somebody else.

• If a credit card has two names on it and the other account holder is alive, that person becomes responsible for the credit card and the debt on it.
• If the credit card is only in the deceased’s name, you need to contact the bank and notify them of the death. They will freeze the account, and no more interest will affect the account.

To use the estate to pay off outstanding debts, you’ll need to apply for a Grant of Representation. This document proves you are legally obliged to handle the estate of the deceased.

Who is responsible for credit card debt after death?

It’s typically the executor or main beneficiaries who deal with the debt of the deceased. The main beneficiary may seek advice and guidance from other family members during this time if they are finding managing the debt challenging.

What happens to personal loans, payday loans, bank overdrafts and car finance after death?

If your loved one had loans - including personal loans, paydays loans, car finance or an overdraft - they will have signed a loan agreement when they took out the loan. The details of the next steps to take in terms of debt will typically be outlined in these, so it’s best to contact the provider to find out more.

During the Probate process, any outstanding debt is usually paid off through the estate before the inheritance is released to the beneficiaries. This type of debt is usually unsecured debt. If there is insufficient money in the estate to pay off all the debts, then the estate would cover as much as is possible, until the funds are used. Any remaining debts are likely to be written off.

What happens to utility bill arrears after death?

What happens to utility bills after a death can depend on whether anyone is inheriting and/or planning to live in the property. If the property is going to be empty or will be inherited and lived in by someone else, it is important to let providers know. For water, gas and electricity, it is a good idea to contact the provider and provide them with a meter reading as soon as possible after the homeowner has died. They will issue a final bill which will usually be covered by the estate. Additional services such as TV or internet subscriptions should be cancelled as soon as is possible. The council tax office should also be informed about the death so that they can determine the next steps.

What happens to secured debts after death?

If a debt is secured against an asset such as a property, then the next steps will depend upon how the asset is owned and whether it is considered to be part of the estate. It would be a good idea to seek advice from experts such as the Money Advice Service, who will be able to advise you.

What happens to store card debts after death?

If your loved one had store cards, they’ll have signed a Terms and Conditions form upon opening their account. The details of the next steps to take in terms of debt will typically be outlined in these, so it’s best to contact the bank who deals with the store’s card accounts. If you don’t know the bank in question you can contact the store and they’ll be able to advise you.

During the Probate process, any outstanding store card debt is usually paid off through the estate before the inheritance is released to the beneficiaries. If there are insufficient funds to cover any outstanding store card debt, this may become insolvent and the store would potentially wipe the debt as a loss. It’s important to check the Terms and Conditions to understand this in full, as it may differ for various stores.

What happens to student loans when you die?

If the individual who passed away had a student loan that wasn’t fully paid off, the (SLC) Student Loan Company will need proof of death, accepted as one of the following documents:

• Original Death Certificate
• Original coroner’s interim certificate
• Copy of coroner’s certificate stamped the coroner
• Copy of a foreign Death Certificate.

You’ll need to send a cancellation request by post to the SLC.

How to pay off the debt of a deceased person

It’s important to pay off your loved one’s outstanding debts in order of priority once you have the Grant of Representation:

• Secured debts including mortgage
• Funeral expenses
• Unsecured debts including credit cards

In some cases, you might need to sell the deceased’s assets to settle any secured debts. Typical assets you can sell are property, vehicles and valuables, such as antiques.

Once all debts are paid, any remaining assets can be distributed to the beneficiaries who have been named in the will. If the deceased didn’t leave a will, the rules of intestacy apply:

• No will = estate is distributed to the surviving spouse or children
• No spouse/children = estate is distributed to the parents or siblings of the deceased

​Learn more about the rules of intestacy at GOV.UK.​

If there’s not enough money to pay off the deceased’s debt, this is called ‘insolvent estate’ – it can be possible to write this debt off only if it’s insolvent (you can’t request that it’s written off otherwise), which means creditors won’t chase you or any family of the deceased, for the money.

Liability for dealing with the deceased's estate

The individual responsible for managing the deceased’s estate, the executor, will assume responsibility for paying off the debts. However, debts will usually be covered by the estate. Being an executor does not mean you will be personally liable to cover debts, but it is a big responsibility, which does have some risks, so it is a good idea to seek advice.

Surviving relatives will not usually be responsible for paying off debts, unless they acted as a guarantor or co-signatory.

Paying for the funeral with the estate

You can use your loved one’s estate to pay for their funeral, but this may only be an option after Probate has been completed (which can take up to approximately 12 months).

If there are funds in the estate to cover the funeral, you could be reimbursed once Probate is complete. It is a long time to wait before reimbursement, and you may find that you can’t make this kind of financial commitment.