Key Takeaways

• When you pass away, your mortgage doesn’t disappear, and the lender still needs to be repaid.
• If you inherit a property that has a mortgage, you will be responsible for making payments on that loan, but there are a few options available.
• If you own a home, planning for the future and deciding what happens to your mortgage when you die is important.

Who takes over your mortgage when you die?

What happens to a mortgage if someone dies without a will?

When to notify the mortgage company?

You’ll want to give yourself ample time to locate and submit any necessary documents, including a death certificate, and assume the mortgage quickly to avoid long-term problems with the lender. You also want them to update mailing and email addresses.

Inheriting a property with a mortgage

Refinance the Loan

Some lenders are willing to be flexible if you’re not in the financial position to assume the loan but don’t want to sell. You might be able to refinance the loan to secure a lower payment or extend the term so it’s more affordable. Depending on the loan’s interest rate in comparison to current rates, you might be better off getting this other mortgage.

Inherited Mortgage With Multiple Heirs

Things get more complicated if multiple heirs inherit an interest in the home. Each party will need to agree on what to do with the property — one might have to buy out the others’ shares, for instance.

If none of the heirs are interested in living in the home, selling it might be the best route. Alternatively, if one or more heirs want to convert it to a rental, consider the ramifications of changing it to an investment property: You might need to get a new mortgage since the original loan was for a primary residence, not an investment property.

Whatever heirs decide, it’s best to enlist the help of an estate or real estate lawyer in these types of situations.

Do heirs need to requalify for the mortgage?

Borrowers must typically meet “Ability to Repay” requirements before a mortgage lender can approve a loan. These rules help protect borrowers from predatory loans they wouldn’t be able to afford.

There’s an exception to this rule if you inherit a home, however. Heirs don’t have to requalify for the mortgage on the home they inherited. This gives them an opportunity to keep the home and assume the loan without having to meet the ability-to-repay requirements. If your goal is to keep the property, though, be sure you can actually afford the mortgage before committing to it.

If you want to change the mortgage terms, however — such as refinancing — you’ll need to qualify for a new loan and meet all of the lender’s eligibility requirements.

How to assume a mortgage

1. Find a reliable lawyer. It isn’t required, but hiring a lawyer will simplify the process and relieve some of the stress of assuming your loved one’s mortgage — especially if you’re grieving.
2. Gather necessary documents. You might need to provide proof that you’re the rightful inheritor of the property or the executor of the estate, so you’ll want to collect relevant documents. To transfer the title, you will need proper authorization/paperwork, including the deed. If you can’t locate it, contact your local records office (e.g., the county clerk) for a copy. You can usually get a copy for a modest fee or pay more for a certified copy (which lenders usually require).
3. Contact the mortgage lender or servicer for next steps and information. Ask about things like the outstanding balance, the monthly payment and other essential details. If you have a lawyer, you can ask them to help you communicate with the servicer, especially if the servicer is less than helpful with your situation.

Remember that you don’t have to go through the underwriting process or requalify for the mortgage to assume it, but you’ll likely need to provide a certified copy of the borrower’s death certificate (and potentially the borrower’s will). If you are a joint owner, you will likely have to show the deed with your name on it.

Once you’ve assumed the loan, you can continue making payments on it or opt to refinance.

Planning ahead

Managing someone’s affairs after they’ve died is challenging and, sometimes, confusing. To help make the process a little easier, here are some ways you can prepare for what happens to your mortgage when you die so your loved ones know exactly what to do when the time comes:

• Consider mortgage protection insurance – If you can’t afford or can’t get approved for traditional life or disability insurance, you can take out mortgage protection insurance (MPI) to ensure your partner or loved ones hold onto your house after you die.
• Plan your estate – Having an estate plan at the time of your death can make life much easier for your loved ones. That’s because good estate plans specifically outline who receives what, which can prevent your family members from wondering about your wishes or fighting amongst themselves. Estate planning is also a great way to minimize taxes on your assets.
• Create a last will and testament – If you own a home, it’s important to plan for the future and decide what happens to a mortgage when you die. Having a clear last will and testament that describes what should be done with your mortgage, bank accounts, and other assets will help your loved ones navigate what to do with your estate.
• Consider a life insurance policy – A good life insurance policy can also help save your heirs from financial stress (but be sure to compare the differences between life insurance and mortgage protection insurance — these are separate policies with separate coverages).