What happens to a mortgage when someone dies?

Although it’s a difficult topic, it’s important to know what happens to a mortgage loan when someone dies. If you’re the current homeowner, you should understand what to expect and even be proactive to help your loved ones seamlessly receive one of your most valuable assets: your home. If your loved one is passing or has passed away, knowing the next steps is crucial.

Dig deeper: What are your financial rights following the death of a loved one?

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A mortgage — much like an auto loan or other loan secured by collateral — is tied to the property, not the individual who took out the loan. That means that, when someone dies, the mortgage isn’t canceled. Payments still have to be made to avoid foreclosure on the house.

Here’s the good news: Someone in your family can make those mortgage payments to keep the loan in good standing. Thanks to a special piece of legislation called the Garn-St. Germain Depository Institutions Act, family members can assume mortgage payments without triggering a mortgage’s due-on-sale clause.

A due-on-sale clause, also known as an acceleration clause, is a common finding in most mortgage agreements that states the lender can require a full repayment of the loan if a property is sold or transferred. This unique piece of legislation gives family members of a deceased mortgage holder the ability to keep up payments without having to apply for a new mortgage in their own name. But there’s one small catch.

Heirs typically aren’t responsible for a family member’s mortgage payments unless they were co-signers on the original loan. This means that, unless you’re a co-signer, a lender can’t come after you for the unpaid mortgage if payments stop. You can choose to let the bank foreclose and sell the home.

If there’s a profit after sale, those proceeds will be paid to the deceased’s estate and distributed according to the terms of a will or probate laws in that state.

The process of inheriting a home has two key moving parts: the relationship between the deceased and the inheritor, and whether the inheritor was on the mortgage. Understanding these details can help you make decisions about your home or inherited property with increased confidence.

When a married couple buys a home and both spouses are on the joint mortgage, the home is typically titled as “joint tenancy with rights of survivorship,” or JTWROS. With this one-two punch, the home and mortgage automatically transfer to the surviving spouse when one spouse dies. The home doesn’t have to go through probate, either — a huge time, money, and stress-saver for the spouse taking on full ownership of the property.

However, it’s important to note that marriage alone doesn’t ensure that a surviving spouse will seamlessly inherit a home.

“Many couples assume that because they’re married, the surviving spouse will automatically get to keep the home,” Kathy Wunderli, head of private wealth at Wealth.com, told Yahoo Finance via email. “While this is true in many circumstances, you must check legal ownership to confirm.”

To verify how a home is titled, you can contact your county recorder’s office or review your original mortgage paperwork. If the home isn’t currently titled as “joint tenancy with rights of survivorship,” you and your spouse can file a new deed with the county recorder’s office. You’ll also need to notify your lender and title company that you’ve made this update so they can update their records accordingly.

If the spouse isn’t on the mortgage and/or deed

Several situations can lead to one spouse’s name being omitted on either the mortgage or the property deed. Perhaps one spouse had stronger credit, so their name is the one on the mortgage loan, but both are on the deed. Or, a couple could have married after one spouse owned their home free and clear, and the deed was never updated to reflect joint ownership. Either way, the path for a surviving spouse to assume ownership of the home could be less clear.

Things will go more smoothly if the surviving spouse is on the deed, as that’s a document declaring legal ownership rights to the property. However, if the surviving spouse is only on the mortgage but not the deed, the spouse is still protected by the Garn-St. Germain Act, and can keep making mortgage payments without needing a new mortgage.

If at all possible, it’s important to ensure that your home deed reflects your inheritance wishes before you die.

Dig deeper: How to change the name on a house deed

When a home is left to an heir via a will, the property typically goes through probate, which is the legal process of distributing a decedent’s assets. Probate can take several months or longer, depending on the complexity of the estate. During this time, mortgage payments still must be made to prevent foreclosure.

An heir inheriting a property has several options: Keep the home and continue payments, sell the home, or disclaim their interest. Keeping the home and making payments is pretty straightforward, but what about the other two options?

“If they sell the property, the heir keeps the proceeds after paying off the mortgage and any other expenses,” said Wunderli. “If they disclaim the property through a legal process, it will pass to the next legal heir.”

If the homeowner dies without a will or a named beneficiary for their home, their state’s intestate succession laws kick in and decide who owns the home.

This process can be lengthy and complicated, especially with a mortgaged home. Things can become even more complicated if multiple family members claim that they’re the rightful inheritors of the home.

“Everyone has an estate plan,” Wunderli said. “The question is whether you created it yourself or whether it’s created for you by the laws of your state. So if you do not have a plan for your mortgaged property, the state will.”

When someone dies intestate (without a will), the courts decide who inherits what. While the state decides who gets a mortgaged home, someone still needs to pay the mortgage. Just consider how sticky this situation could become when multiple family members claim they want the home. It’s the kind of thing that can tear families apart — underscoring the importance of having a basic estate plan in place.

One of the greatest gifts someone can give to their family while they’re still living is a basic estate plan. It’s possible to craft a simple will that’s legally binding in your state for free through multiple online services. You’ll need to have it notarized to ensure it’s legally binding, but that’s also a service easy to find through a local bank or online.

Beyond your will and naming who should inherit your home, here are some simple steps you can take to ensure your home transfers seamlessly upon your death.

Update your deed and title

You can visit your county assessor’s office online or in person and ensure your property is titled appropriately. If you have questions, experts at this office can help you choose a title method that aligns with your wishes.

Whether it’s a surviving spouse or someone else inheriting your property, suddenly taking on mortgage payments can create a significant burden. Wunderli suggested purchasing a small life insurance policy payable to your beneficiary that can help cover several months of mortgage payments. You could also consider a policy that pays off the balance of the mortgage entirely.

Alternatively, you could also set up a transfer-on-death (TOD) savings account that immediately goes to your beneficiary when you pass. This is similar to a payable-on-death (POD) bank account, except that rather than transferring bank assets, it’s for transferring investment assets such as property or stocks. Your bank can help you with account setup so that your beneficiary has near-immediate access to funds.

Whether expected or not, the loss of a loved one is a startling event. Having a roadmap, especially if your loved one didn’t provide one, can help you protect a mortgaged home until the legal process plays out.

• Notify the lender of the death. The mortgage lender will typically need a copy of the death certificate to set any property transfer in motion. Your funeral services provider or estate attorney can often help with the necessary paperwork to get copies of the certificate.

• Determine who is on the property title and mortgage documents. This information will help you understand who has a legal claim to the property and who’s financially responsible for the mortgage.

• Identify who’s handling the estate. If your loved one dies with a will or trust in place, reach out to the executor (will) or trustee (trust) to establish a plan for the home’s future.

• If possible, keep making mortgage payments. If you don’t have the money on hand to keep the mortgage current, consider collaborating with other family members to pool financial resources or contacting the lender for options.

• Consider your options. Take a moment to evaluate whether selling the house, refinancing the mortgage, or transferring ownership of the home is the best option. Don’t feel pressured to rush the decision, and consider reaching out to a legal expert to better understand your options.

Read more: The best mortgage refinance lenders right now

When you die, your mortgage doesn’t automatically disappear. A mortgage is a secured loan that’s tied to the property, so someone — typically a surviving spouse, heir, or the decedent’s estate — must continue making mortgage payments to avoid foreclosure. However, family members aren’t personally liable for the mortgage debt unless they co-signed the loan. It’s important to communicate with the lender and understand the legal ownership to manage payments properly after death.

Yes, you can inherit a house with an existing mortgage. The mortgage stays with the property, meaning the heir takes on responsibility for the loan payments. The heir may continue making payments, refinance, or sell the home to pay off the mortgage. If the heir doesn’t want the property, they can legally disclaim their interest, which passes ownership to the next eligible heir.

Yes, a mortgage can remain in the deceased person’s name until the loan is paid off or transferred to the appropriate surviving spouse or heir. The mortgage doesn’t automatically transfer to heirs unless they assume responsibility. Meanwhile, mortgage payments still need to be made to avoid foreclosure. Sometimes, probate or estate processes delay transferring ownership or refinancing, so heirs or executors need to coordinate with the lender and ensure payments continue.

Laura Grace Tarpley edited this article.