Remortgaging an Inherited Property

Have you inherited a property and need to remortgage? An expert mortgage broker can help you to do just that.

Are you looking to mortgage a property in probate?

Home Remortgages Remortgaging An Inherited Property
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Nathan Porter

Reviewer: Nathan Porter

Independent Mortgage Advisor

Updated: March 15, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

March 15, 2024

There are a number of reasons why you may want to mortgage a house in probate – the legal process where a will is certified in court.

In this article, we look at all the different situations that can arise and how using a mortgage broker with experience in this very specific area of home financing can save you a lot of time and, potentially, some money too.

Can you get a mortgage on an inherited property?

Yes, and there are a multitude of reasons you might want, or need, to do so, such as:

  • If you’ve inherited a property with a mortgage, you’ll need to remortgage to one in your name.
  • If you’re looking to buy a house that’s being sold by its inherited owners whilst still in probate (perhaps the sale is needed to settle outstanding debts or the new owners can’t afford the mortgage).
  • If you’ve inherited a house but it needs home improvements that a mortgage could finance.
  • If you inherited a property with others and want to buy them out.

Regardless of your reason, it’s important to note that you can only begin the remortgaging process once probate is finalised, as no lender will consider the case until it has been granted. This can take several months so you have time to decide on what you’d like to do and to consult a mortgage broker on what your options might be.

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How to get a mortgage on a property in probate

Your first step should be to find a specialist remortgage broker as this will save you a lot of time and boost your chances of getting approved at the best terms available.

Using our free broker-matching service you can speak straight away to the right broker by simply making an enquiry online. They’ll be able to help with:

  • Gathering all the necessary paperwork and documentary evidence required
  • Downloading your credit reports
  • Finding the right lender and securing the best deal for you

Inheriting a home with an existing mortgage

In this scenario, you inherit the property as well as the mortgage (unless the deceased had a life insurance policy that covers the remaining balance or some other means of settling the debt). You must decide whether to sell the property, pay the mortgage off through the sale, or take out a new mortgage in your name.

To ascertain whether you can afford to take on the mortgage, you should reach out to a broker with experience in inherited properties. They’ll be able to work with you and the deceased’s mortgage lender to find out how much of the loan is left before assessing your finances to see whether the cost is something you can take on.

If it is, you may be able to stay with the same lender and renegotiate the terms. But, as a new applicant, you would be required to meet the lender’s various eligibility requirements around income, credit history, outgoings and age.

Alternatively, you could switch to a new lender. A broker would be able to assess the market and advise on whether you’re likely to find a better rate and terms elsewhere.

How to refinance to buy out others

If you’ve inherited a property with others – typically family members – there will be a series of joint decisions to make; the first one being around whether to sell the property, continue to jointly own it or have someone buy out the others. If you’d like to be the one to take ownership, the steps you’d need to take include:

  • Having a solicitor formalise your intention to buy other owners out with a letter of intent.
  • Reaching out to a broker who can verify you’re in a financial position to take on the mortgage without the co-owners. They’ll be able to assist in putting together a strong application, which should include at least a 5% deposit.
  • Informing the land registry via a solicitor that you are the new homeowner once the mortgage is approved, and paying the co-owners their agreed-upon share.

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Putting a buy-to-let mortgage on an inherited property

It could be that you want to retain an inherited property but have no desire to move into it. This is where remortgaging onto a buy-to-let mortgage comes in, allowing you to rent out the property.

The interest rates for this type of property loan tend to be higher than on a residential mortgage and the requirements are a little more stringent. It’s common for a lender to want an applicant:

  • To earn a minimum of £25,000 per annum;
  • To have at least a 20% as a deposit;
  • To charge rent that will cover between 125%-145% of monthly mortgage repayments
  • To have some experience as a landlord.

Don’t panic if you don’t meet one or more requirements. Some buy-to-let lenders have flexibility and a broker would be able to connect you to one likely to look favourably on your circumstances.

Sidenote: If the property you’ve inherited is already rented out, the executors of the deceased’s estate will receive the rent until probate is finalised.

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Inherited properties and equity release

It could be that you don’t want to sell the property – perhaps for sentimental value – but could benefit from releasing some of the equity within it. Alternatively, you could have inherited a house that’s already been through the equity release process.

Inheriting a property with equity release

When a homeowner applies to their lender to release some cash from their home, they agree on an equity release repayment plan. Typically that involves the lender being remunerated via the sale of the property once the original applicant has died. Any remaining money from the sale would then go to the inheritors. Each lender will have a different deadline from the time of death that they’d like to receive repayment but usually, this exceeds a year.

If you’ve inherited a property that’s been through equity release but would rather not sell the property, the equity can be paid back in other ways. You can:

  • Use funds from the deceased’s other assets, should they have any;
  • Use your own money to cover the remaining loan;
  • Purchase the property directly from the estate.

Releasing equity on an inherited home

If you’ve inherited a property and would like to borrow against it – perhaps to do some home renovations or purchase another property – that’s an option, as once probate has been granted you can borrow against the property in the normal way.

Get matched with a broker who specialises in inherited properties

With so many decisions to make, procedures to go through and people to inform, having on-hand expert advice from brokers who have been through this process multiple times is invaluable.

The inheritance mortgage experts we work with will be able to take stock of your financial picture while considering the property in probate. From there, they can provide advice on which mortgage type and lender you should apply to and can walk you through each stage, saving you hours of research as well as money and potential stress.

Call 0808 189 2301 or fill out an online form to be connected to a specialist on remortgaging inherited properties today.

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During this time, a lender will still be charging the mortgage interest rate but the good news is that most lenders will allow for the delay of payment until after the probate process. Once finalised, the executors could then pay any outstanding payments from the deceased’s estate.

If the amount of the inheritance exceeds £325,000 (current standard nil rate band 2023-24 UK tax year), inheritance tax will have to be paid. Any existing mortgage detracts from the overall amount of the estate so if you have a £400,000 estate with a remaining mortgage of £150,000, that would reduce the total estate worth to £250,000. This means no inheritance tax would have to be paid.

If the total amount were to be over £325,000, the tax would be 40% of the sum of money over £325,000. For example, if the estate is worth £400,000, 40% of £75,000 – £30,000 – would be paid.

Normally, if the property was owned in joint name before one or both owners passed away, then both of their nil-rate bands could be considered. It’s important to seek independent tax advice if you are concerned about inheritance tax.

During the probate process, a property is valued in line with the current open market value without considering any other possibilities such as whether someone might be willing to pay over the asking price. Oftentimes this means buyers get a better deal than they otherwise would.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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