Your Home Is Security for the Company Overdraft

If you signed a personal guarantee for the company facility and backed it with a charge over your house, the honest position is this: your home is at risk if you die still owing the money, because the guarantee does not die with you. It becomes a debt of your estate, secured on the property, and it ranks ahead of anything your family is meant to inherit. Limited liability protects the company. It does not protect the house you put up as security.

Most directors sign this paperwork years before it matters and then forget the detail. The overdraft was small at the start, the bank wanted comfort, you signed, and the facility has quietly rolled over ever since. What that signature is actually worth today — the number the family would face — is usually much larger than the amount you remember agreeing, and it is measured against the current value of the home, not the value when you signed.

This page sets out what you signed, what the exposure is worth now, why it reaches the family home in spite of the company being limited, and how the debt can be cleared before the estate is touched rather than after.

The short answer: it is a debt of your estate, and it ranks first

When a company borrows and a director guarantees it, two separate obligations exist. The company owes the bank, and you separately promise the bank that if the company does not pay, you will. Those are different debts against different people. The company's debt is limited to the company. Your promise is personal and unlimited by the company's status.

Death does not cancel a personal promise. The liability under the guarantee passes into your estate as a debt, and if you also granted a charge over your home, that debt is secured on the property. The practical consequence is stark: before your executors can pass the house, or its value, to the people in your will, they must deal with the debts secured against it. A secured guarantee sits at the front of that queue. We set out the general rule in why a personal guarantee does not die with you.

So the family is not choosing between keeping the house and losing it in the abstract. If the company cannot repay the facility after your death and there is no money set aside, the choice narrows to finding the cash from somewhere or selling the property the charge is registered against.

Guarantee, charge, and what you actually signed

Two documents usually sit behind this, and they do different jobs. The guarantee is the promise to pay. The charge — often called a legal charge or a second charge over your home — is the security that makes the promise enforceable against the property specifically. A guarantee without a charge still exposes your estate; a guarantee with a charge points the lender straight at the house.

The wording matters more than most directors realise. Many guarantees are drafted as "all monies" guarantees, meaning they cover whatever the company owes the bank from time to time, not just the original overdraft. That is how a signature given for a modest facility ends up covering a much larger sum years later, after the overdraft was increased, a loan was added, or asset finance was taken on the same relationship. The guarantee did not change; the borrowing behind it grew.

It is also common for these guarantees to be given jointly and severally with a co-director or a spouse, which means each guarantor is liable for the whole amount, not a share of it. If a co-guarantor has already died, the survivor can be left carrying all of it. That specific trap is worth reading separately, because it catches spouses who signed once and forgot.

What the exposure is worth today

To know what your family actually faces, you need three current figures, and only one of them is the number you remember. The first is the outstanding balance on the facility today, not the limit you originally signed for — ask the lender in writing for the current exposure under every guarantee you have given. The second is the value of the charge, which is usually capped at the borrowing but can include interest and costs. The third is the current value of the home the charge is registered against.

That third figure is where property prices come in. The exposure only bites on the house to the extent the house is worth enough to meet it, and home values move over time. The official measure of what property is worth by area is the Land Registry's UK House Price Index, which is the sensible reference point rather than a guess or an old valuation.

Source: HM Land Registry, UK House Price Index, published under the Open Government Licence.

You can also see exactly what is registered against your home by checking its title. A charge in favour of a bank is recorded on the register of title, and the register will show who holds it. You can obtain your title through the gov.uk service for information about property and land, run by HM Land Registry, which is the definitive record of what is secured on the property rather than what you think you signed. Do this before assuming the guarantee is unsecured — many directors are surprised to find a charge they had forgotten.

Why limited liability does not save the house

The mental model most directors carry is that trading through a limited company means the business risk stops at the company. For the company's own debts, that is broadly true — the whole point of incorporation is that shareholders are not personally on the hook for what the company owes. The guarantee is the deliberate exception the bank builds in to get round exactly that protection.

A lender to a small company knows limited liability would otherwise leave it with no recourse if the company failed. So it asks the director to step outside that protection voluntarily, by giving a personal promise. Once you sign, the debt has two doors: the company and you. Your limited liability closes the first door. It does nothing to the second, because the guarantee was designed to sit outside it. This is why company borrowing so often reaches the family home despite everything about the company being limited — a point we develop in how trade credit accounts backed by a personal guarantee behave after death, which are another common source of guaranteed debt directors forget about.

There is a further asymmetry worth naming. Key person and similar business cover, if the company holds it, pays the company, not your family — it is there to keep the business afloat, not to clear your personal guarantee. We explain that distinction in why key person cover pays the company and not your family. Clearing a guarantee secured on your home is a job for cover arranged around you and your estate, not around the company.

Clearing the debt before the estate is touched

The way to keep the house out of this is to make sure money exists to settle the guaranteed debt without reaching for the property, and to make sure that money arrives outside the estate rather than inside it. Two features do that work: the type of cover, and the trust it is written into.

On type, a guarantee that reduces as the company repays the facility is a natural match for decreasing cover, which is designed to fall over time in step with a reducing debt, so the amount of cover roughly tracks the exposure down. Where the borrowing is a fixed amount that does not amortise, level cover fits better. The point in both cases is to size the cover to the exposure you established above, and to review it as the borrowing changes, because a guarantee that has grown leaves a gap and one that has shrunk leaves you paying for more than you need.

On structure, writing the policy in trust for chosen beneficiaries matters for two reasons. It generally keeps the proceeds outside your estate for inheritance tax, and it lets the money reach the people you name without waiting for the grant of probate — which is exactly the moment the debt needs settling. The family can then use it to clear the guaranteed debt and keep the house, rather than the debt forcing a sale first. If you want to arrange cover sized to a guarantee like this, you can get life insurance quotes through an FCA-authorised broker who can price it against the actual exposure.

What to check this week

This is not a problem to think about one day. It is a set of documents to find now, while you can still act on what they say.

Ask each lender, in writing, for a copy of every guarantee and charge you have signed and the current balance covered by each. Pull your home's title from Land Registry and read the charges section. Check whether any guarantee is joint and several, and with whom, because that changes who is left carrying it. Then compare the total exposure against any cover already in place, and against whether that cover is written in trust or sitting inside your estate where it will be caught by the very debt it was meant to clear. A guarantee you have quantified is a problem you can solve; one you have not looked at in a decade is the one that catches the family unprepared.

Scotland and Northern Ireland

The core position is the same across the UK: a personal guarantee is a debt that survives you, and security over your home makes it enforceable against the property. What differs is the machinery of the security and the register. In Scotland, security over a home takes the form of a standard security rather than an English legal charge, and property and title are recorded at Registers of Scotland; a surviving guarantor's authority over the estate flows through confirmation rather than probate.

In Northern Ireland, land and charges are recorded through Land and Property Services, and the succession and grant process runs through its own courts. None of these differences reduces the exposure or changes the basic answer — the guarantee still reaches the house — but they change which register you check and which office issues the grant. The rest of this topic sits in our guide to what dies with a business owner, and if the wider worry is the company itself grinding to a halt, read how long a company is paralysed after its owner dies.

Frequently asked questions

Can the bank take my house if I die owing a personal guarantee?

A guarantee backed by a charge over your home is a debt of your estate, and the lender can enforce it against the property if the company cannot pay. It ranks ahead of anything your beneficiaries are due to receive, so unless money is set aside to clear it, the family can face a choice between finding the cash and selling the home the charge is registered against.

Does life cover pay off a personal guarantee?

A policy arranged for that purpose can provide money the family are able to use to settle the debt, provided a claim is admitted under the policy terms. Writing the cover in trust for chosen beneficiaries helps the money arrive without waiting for probate and generally keeps it outside the estate for inheritance tax, so it can clear the guarantee before the house is ever in question.

How do I find out what I have actually guaranteed?

Ask each lender for copies of every guarantee and charge you have signed and the balance each currently covers, and check your home's Land Registry title for registered charges. Facilities are often renewed on the same guarantee for years, and many are drafted to cover all the company owes from time to time, so the real exposure can be far larger than the original overdraft you remember agreeing to.