So, you’ve inherited a house. Now, you’re wondering what costs are involved, what papers need to be processed, should you really keep it and so on. There are a lot of considerations involved in inheriting a house. Thankfully, you don’t have to make all those decisions right away.
This is likely a very emotional time for you and your family. First off the list is to make sure all arrangements have been sorted out. If you’re in London, there are several professional funeral services that can help during this stage.
This step will also give you clear some of the requirements for the estate inheritance like the grant of probate. According to the UK Government, you’ll need to send them a copy, along with other important documents that will be discussed further in this article.
Basically, probate is the process when the executors of the will deal with debts, taxes, and other affairs of the deceased before they can hand assets over to you and other beneficiaries. Sometimes, it can take a year for a probate to be completed. During this time, the property is technically not yours yet, so you can do very little with it. If the house has a mortgage, you may want to explain the situation first with the lender. They will most likely grant a grace period while the estate is prepared.
If the person who died doesn’t have a will or a spouse, you should apply for a ‘grant of representation’ to have access to their bank account. This will make you responsible for paying debts, taxes, and sorting out the estate.
According to the Home Owners Alliance, if the deceased had life insurance, it can be used to clear the mortgage. In cases where the life insurance cannot cover the mortgage, you’ll need to review the terms of the mortgage and talk to the lender to find out what exactly is expected from you. Even if payments are likely frozen during this time, interest may still accrue.
If the deceased had other assets or cash, the mortgage is usually considered as another debt that needs to be settled before the estate is sorted out.
If the mortgage passes on to you, and you already have a mortgage under your name, you may need to pass an affordability test. The Nationwide Building Society has a helpful Mortgage Affordability Calculator on their website you can use to check your status.
If the value of the estate of the deceased is over £325,000, inheritance tax will be due. Selling the property may require you to pay the capital gains tax. If you’ve inherited a property that’s buy-to-let or holiday let, you will need to pay income tax when you begin to receive rent.
Stamp duty will be levied if one beneficiary decides to buy out others in a shared inheritance.
Selling, Renting Out, or Moving In
Once the documents are in order and you have become the official owner of the property, decide whether you want to sell it, rent it out, or move in. Like with any other house, the best step before selling or renting out is to update its features. This will increase the value and make it more attractive to buyers and renters.
Inheriting a house can be emotional, difficult, or rewarding. Make sure you understand what it entails and you do your due diligence.