What Happens to My Mortgage If I Die?

The subject of what your family should do with your property upon death isn’t an easy one to talk about.   But what happens to a mortgage if a family member should pass on before it has been paid off?  Many questions may come to mind.  What if there isn’t mortgage insurance on the property? Will the house be taken by the bank or current lender?  Can a family member take over my mortgage?  How can family find out the information on my mortgage?  The inheritance of a home is typically decided by a will or probate proceedings.  But if a home has a mortgage on it, whoever inherits it will have some work to do.

How do I get information on the mortgage? 

Hopefully, your family member will have left detailed records behind on their mortgage.  But if they haven’t, you can search public records and look for the deeds used for mortgages.  You will need to have the owner’s information and there may be fees associated with the request for information.  The deed should have the legal description, address, lender, mortgage amount, and other information related to the property.  Once you have the mortgage information, you will need to contact the lender, let them know the owner has passed and find out any information you can about the mortgage.  For example, you may want to ask if there is mortgage protection insurance.  Mortgage protection insurance(MPI) can help family cover a mortgage under certain circumstances.

Due on sale clause

When a property with a mortgage transfers ownership, there typically is a due-on-sale clause that is triggered.  There are laws, however, that allow heirs to take ownership of a property without the requiring immediate payment.  If there is a co-signer on the loan, and that person is still alive, then he or she will still be responsible for the payments of the mortgage.

What are my other options?

There are other options you may want to consider.  If the heirs decide not to keep the home, the home can be sold to pay off the mortgage.  This may be a good option if there are multiple people inheriting a property.  For example, two siblings inherit their parents’ home.  They may not want to or be able to keep the home.  Selling the home and dividing the profits might be more beneficial for both.

Another option that may be considered is refinancing.  Consider the previous example.  Perhaps one sibling wants their parents home to stay in the family.  Refinancing the property and buying out the other heir would be the optimal decision.

What should I do now?

Thinking about death and what happens after is never easy.  The best thing you can do for your family is to plan ahead.  You don’t need to be rich or have a ton of assets to start estate planning.  Consult a financial expert and discuss options, such as a will, life insurance and who will be the executor of your estate.  But most importantly, communicate your wishes to your family and let them know what needs to be done.  You can’t predict the future, but you can give your family peace of mind knowing that things are in place should the worst happen.

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