Mortgage During Probate

Mortgage During Probate: What Happens?


When a loved one passes away, it can be difficult to understand what happens to their property and their mortgage, as well as who is responsible for the next steps.

By understanding the rules associated with a mortgage during probate, you can prepare yourself for any eventuality and lessen the burden you may experience navigating mortgage requirements during a time of grief.

What happens to a mortgage during probate, and what do you need to know about the process of finalising a deceased estate? Here is your guide.

What is probate?

Probate is a court order that confirms the validity of a deceased persons will and provides the executor of the will with permission to distribute the deceased estate.

During the probate process, people who believe they are entitled to part of the estate can contest the wheel. This may include family members or creditors, such as the Australian Taxation Office, in the event that the deceased person had an outstanding tax debt.

If the deceased person was a sole owner of the property and there is a shortfall in the property sale to cover the outstanding mortgage amount, the mortgage lender may also become involved in an effort to recover funds

What happens if a mortgage holder passes away?

When someone passes away, a few things may happen to their mortgage.

In the event of co-ownership, the deceased person’s share of the mortgage is usually bequeathed to the surviving co-owner. In this instance, property ownership automatically reverts to sole ownership, and the current property owner can approach a solicitor to change the property title.

If the deceased person was a sole owner of the property, their beneficiaries may inherit the current equity. However, beneficiaries also inherit the outstanding mortgage debt.

Often, beneficiaries are unable to repay the mortgage amount. When this occurs, many people choose to sell the property to recover costs and repay the mortgage lender the outstanding amount.

How do you finalise a deceased estate?

Usually, when someone passes away, the deceased estate automatically transfers into a trust until it is clear how the property and other assets will be distributed among beneficiaries.

If there is a will in place, distribution of the deceased’s estate will be informed by the will. If there is no will available, distribution usually reverts to the succession laws set by your state or territory government.

If there is a will in place, you will often need to go to the probate court, ideally with the help of a skilled solicitor who can fairly divide the deceased’s assets and advise on the total payout, including any interest. This process will also help you navigate inheritance of property and mortgages.

Finalising a deceased estate can be a lengthy process, often taking up to 8 weeks depending on how many cases are currently being processed and the complexities of your case.

You don’t have to navigate the complexities of a mortgage on your own. Talk to the best mortgage broker Sydney has to offer. Contact the Our Top 10 team today.

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