Can a Bridging Loan Be Used for Probate Issues?

Losing a close friend or relative can be both a sad and stressful time, which is only exasperated by the amount of paperwork and organising you have to do if you’ve been appointed executor of their estate. Sorting through their finances can be arduous and may have you wondering, as a beneficiary, can you inherit debt? And, if so, can a bridging loan be used to help cashflow issues?

What Happens to Loans When Someone Dies?

Here in the UK, when someone dies, no one else becomes responsible for the individual’s sole debts, but money owed is paid out of their estate by the executor of the estate or the administrator (if there wasn’t a will) before assets are divided and passed on to beneficiaries.

Please note: If a mortgage or loan was joint and severally liable or subject to a guarantor, then the surviving party will become liable for the outstanding balance.

If there isn’t enough money in the estate to pay off any outstanding debts, then these should be paid in a set priority order (before giving anything to beneficiaries named in the will) until the money runs out.

In some cases, if the deceased had life insurance, the pay-out will cover the full amount owed on any mortgages. However, this is not guaranteed.

We would always recommend speaking to a trained probate solicitor for expert advice on dealing with complex probate issues.

So, Why Might You Need a Probate Loan?

Short-term probate loans are most commonly taken out to help resolve probate issues while waiting for the estate to be administered. When the deceased’s affairs aren’t straightforward, you may need to restructure their finances for probate and this form of finance will provide a little bit of breathing space.

Could a Probate Bridging Loan Help?

Bridging loans can be used for almost any legal purpose. So, you may choose to use a bridging loan to pay inheritance tax before any interest payments incur,  for beneficiaries to pay legal fees or  to help avoid a rushed, below-value sale of the deceased’s property to pay off debts and fees.

A probate bridging loan works similarly to if you took one out for chain break finance or to purchase a property at auction. The loan will be short-term, usually around a year, and can be anywhere from tens of thousands to hundreds of thousands of pounds. This will be secured against an asset, such as the deceased’s property which can be used to repay the loan once sold or refinanced.

A bridging loan for probate will be flexible and quick to arrange, however, we would not recommend using this high-interest form of short-term finance, unless it is a last resort.

As a property finance broker, we generally arrange commercial unregulated bridging loans for meeting transaction deadlines, chain break finance, property auctions and refurbishments. You can find out more about this on our bridging finance page.

Find Out More About Bridging Loans

Though not suitable for all circumstances, bridging loans can be a useful source of finance that can be arranged far more quickly than a standard mortgage.

If you have any further questions about the possible uses of a bridging loan, contact us today.