Let’s face it — loss of a loved one is never easy. And dealing with their financial matters, including a home loan, on top of it all can only add to the pain.
First and foremost: If you’re coping with a loss and have suddenly found yourself face-to-face with the question of “what happens to a mortgage when someone dies,” our deepest condolences.
It’s an unfortunate topic, but also an opportunity to set expectations and consider all options.
In this guide, we’ll break down what happens to a mortgage when someone dies, who might be responsible for it, and what steps you might take moving forward. So, whether you’re planning ahead or navigating a loss, you’ll be better able to make informed decisions during this difficult time.
Does the mortgage simply disappear?
Some debts, like federal student loan debt, are often discharged once the lender receives the required proof of death.
Other kinds of debt, like car loans, personal loans, and credit card debt, will need to be paid out by the deceased’s estate.
Estate: The total net worth of an individual. This includes land, real estate, cash, and any other assets the deceased might have owned.
Mortgage debt also falls into this category.
So, the long and the short of it is, no, mortgage debts do not go away when the homeowner dies.
That’s because the lender has a financial interest in the home until the mortgage is repaid — they still need to recoup the funds they lent to the borrower.
So, assuming you or another party would like to keep the home and the home loan, who is responsible for the mortgage after death?
The answer to this question will depend on the specific home and mortgage, as well as the deceased’s wishes.
Their will is critical in determining who should be responsible for the mortgage after death.
Will: A legal document providing instructions for managing the estate. An executor, the person tasked with making sure these instructions are followed, might also be named in the will.
Typically:
Of course, you’ll want to speak and confirm with a home finance or legal professional that one of the above options applies to your specific situation.
Now, what if you don’t want or can’t afford the mortgage?
Assuming you aren’t a co-signer or co-borrower on the mortgage (co-signers and co-borrowers are just as liable to repay a loan as the primary borrower), there’s no rule stating that you have to take on the mortgage.
If you’ve decided that assuming the mortgage is not an option, you have a few additional avenues:
Again, you’ll want to speak to and confirm with a home finance or legal professional that one of the above options applies to your specific situation.
Keep in mind that the above is just an initial framework. Wills, estates, and mortgages themselves can all be highly complicated. That’s why it’s always a good idea to speak with an attorney who has solid experience in trust and estate law.
Also note that, if the deceased doesn’t have a will or if a will is contested, the state’s probate court will likely come into play.
Probate court: The part of the judicial system that handles wills and estates. The court acts similarly to an executor, ensuring outstanding debts are paid and assets are distributed properly.
There are also attorneys that specialize in probate law that you can speak with.
But ultimately, whatever your situation looks like, seeking support from qualified professionals during this time is critical. Navigating the loss of a loved one can be made even more difficult when you are responsible for making decisions regarding their assets, such as their home, so it’s especially important to seek guidance in moving forward effectively.
While a mortgage doesn’t just disappear when someone dies, there are a few powerful options to consider in moving forward. Whether the home is inherited, sold, or the loan is assumed, loved ones have choices.
If you’re facing this situation and feel unsure of your next steps, consider speaking with a mortgage professional or estate planning attorney to explore your options.