What Happens to Your Mortgage When You Die?

What Happens to Your Mortgage When You Die?

Mark Henricks  Mon, April 18, 2022

If you die owing money on a mortgage, the mortgage remains in force. If you have a co-signer, the co-signer may still be obligated to pay back the loan. A spouse or other family member who inherits a house generally has the right to take over the payments and keep the home. Alternatively, terms of a will may direct that the estate’s assets be used to pay off the mortgage, and sometimes a life insurance policy will pay off the mortgage if the original borrower dies. If no one will assume the mortgage and there is no provision to pay it off, the lender may foreclose on the property and sell it. A financial advisor can help you deal with mortgage challenges during the estate planning process.

What Happens to Your Mortgage After Your Death?

Mortgages, unlike most other debts, don’t usually have to be paid back from the estate of a deceased person. With credit cards, car loans and similar debts, family members generally aren’t directly responsible. Instead, debts will be settled with funds from or generated by sales of assets in the estate before anything is distributed to heirs.

When the deceased person was married, the situation is different in community property states. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In these states, surviving spouses may be responsible for paying back mortgages as well as other debts assumed by a deceased spouse during the course of the marriage. Note that debts assumed before the start of the marriage are normally not the responsibility of the surviving spouse. The specifics vary significantly from state to state, however.

With a mortgage, only the specific property that secures the loan is affected. Unless the will specifies otherwise, the other assets in the estate can be distributed to beneficiaries through probate rather than being applied to the mortgage.

While the mortgage debt survives the deceased person, the responsibility for paying it back doesn’t automatically transfer to anyone other than a surviving spouse in a community property state, again unless there is a co-signer. If there is a co-signer, that person remains responsible for the mortgage debt after the death of the other co-borrower.

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