This article is aimed at couples who have a mortgage but who are not married or in a civil partnership.
Let’s start with the basics. A mortgage lender will only permit the borrower(s) to be named on the Deeds.
So if both your names are on the Deeds, the mortgage on that property is a joint debt.
What does a joint debt mean in practice? It means that if one of you dies, the whole debt carries on in the name of the surviving partner.
Hopefully, you will have life insurance.
However, a lot of unmarried couples fall into a simple trap with life insurance.
Firstly, modern life insurance policies do not pay out to your mortgage lender, even if it was a condition of your mortgage that you had life insurance.
Secondly, unless the policy is written into trust (only 10% of policies are) or owned by the surviving partner (even less likely), the insurance company will simply pay out to your estate.
If you have a Will, the life insurance payout goes to your Executors, to pay on to the beneficiaries named in your Will.
If your partner is not the only beneficiary, they will not receive the whole life insurance payout.
However, they will still be responsible for all the remaining balance owed on the mortgage, leaving them at risk of repossession.
If you don’t have a will, the law decides who will inherit your estate (including the life insurance payout).
An unmarried partner is never entitled to inherit where there is no Will.
Instead, all the children of the dead partner will inherit.
If there are no children, other family members will inherit. If there are no other living family members at all, the Government will inherit.
The only way for an unmarried partner to inherit is to take legal action against those who do inherit.
This often means that the unmarried partner has to sue their own children.
To make matters worse, if you own your property as “tenants in common”, the estate of the partner who died will include their share of the equity in your home.
If that happens, the surviving partner will inherit all the mortgage debt, but none of the life insurance payout, and none of the equity of the partner who died.
This makes repossession even more likely.
If any of this applies to you, you need to make Wills now.
Contact our Private Client team today.
If you would like to speak to our expert legal team about this, or any related subject then please contact our team by phone on 0207 936 6329, Email or by completing our Quick Contact Form below.