What happens to a mortgage when someone dies? Quick guide

When a homeowner passes away, what happens to their mortgage depends on a few key factors, like who inherits the home, what the beneficiary plans to do with it, and the type of loan involved.

Below, you’ll learn what happens to a mortgage when someone dies so you know what to expect, whether you’re an heir or just planning ahead. You’ll also find out how Better’s expert support agents can guide you through the process. 

What happens to your mortgage when you die?

There are several factors that go into what happens when someone dies and still has a mortgage. In the simplest case, if there’s a co-signer or co-borrower, they continue paying the loan as usual. If there’s no co-borrower but there’s a will and a clear beneficiary, the heir can choose to assume the mortgage if they satisfy the lender's requirements.

Unfortunately, things aren’t always so easy. Here are some common scenarios that can complicate mortgage transfer after death.

When the homeowner doesn’t have a will

If there’s no will or trust, the executor of the estate must keep up with the mortgage payments until the estate has been settled and the court decides who will inherit the property. This process is called real estate probate. Real estate probate typically takes at least six months, and the lender may take action to foreclose if the estate can’t cover the mortgage payments during this time.

When the surviving spouse isn’t on the mortgage

If the surviving spouse isn’t on the mortgage, they’re not out of luck. If they legally inherit the home, federal law protects their right to assume the mortgage and hold onto the property.

When there are multiple heirs

When several beneficiaries agree to assume the mortgage, they become jointly responsible for the mortgage payments. They can work together to refinance the loan in their names, sell the property and split the profits, or come to another agreement.

When it’s a reverse mortgage

A reverse mortgage is a type of loan that allows older homeowners to convert part of their equity to cash without making monthly payments. Instead, the loan balance is due when the homeowner moves out, sells the property, or the home is sold.

When the homeowner dies but holds a reverse mortgage, the heirs or the executor have a few options. If they want to keep the home, they have to pay off the loan. If they don’t want it, they can sell it and keep any equity that’s left over. They can also simply walk away and allow the lender to foreclose on the property, satisfying the debt. Once beneficiaries receive a notice that the reverse mortgage is due, they have 30 days to take action.

Reverse mortgages are “non-recourse” loans, which means the lender can’t demand more than the home is worth even if the loan balance is higher. This protects beneficiaries from inheriting debt.

How and when to notify a mortgage company of a death

If you’re an heir or executor of a deceased mortgage holder’s estate, it’s best to notify the lender as soon as possible. Taking too long can lead to missed mortgage payments, late fees, and even foreclosure.

Here are the steps to take when a borrower dies:

1. Notify the mortgage company: Communicate in writing that the mortgage holder has passed away. Include the borrower’s name, address, date of death, and basic mortgage information, like the account number.

2. Provide a death certificate: Include a copy of the death certificate to verify the event.

3. Submit executor info: Give the lender documentation confirming who the executor is, together with their contact details.

Afterward, the lender will get in touch with next steps.

What’s the process for assuming a mortgage loan after death?

Assuming a mortgage means assuming the legal and financial responsibility tied to it. The process isn’t too complex when you know what you’re dealing with. Here’s how to do it:

— Hire a lawyer: While not strictly necessary if it’s a clear-cut case, a lawyer can guide you through the process. If there’s no will or heir or there are other complications, a lawyer is indispensable.

— Gather documentation: Collect the borrower’s death certificate, the deed to the property, the mortgage contract, and any legal documents that show you’re the legal heir or executor. You may also need to provide a copy of the will and documentation proving your ability to pay, like a credit check or proof of income.

— Notify the lender: Contact the lender and provide any necessary paperwork. If you need extra time to get the death certificate, you get 30 days to provide it after notifying the lender of the death. If anything feels unclear, Better’s customer support team is here to guide you through the assumption process.

...in as little as 3 minutes – no credit impact

— Take over the mortgage payments: Keep making payments even while your paperwork is being processed to avoid late fees and foreclosure. Consider refinancing if you can’t afford the mortgage payments or think you can get better terms.

— Sign: If the lender is satisfied with your documents and ability to pay, they’ll give you an assumption agreement to sign. Once you sign it, the process is complete and you can decide what to do next, whether that’s holding, refinancing, or selling.

Tips to prevent mortgage problems after death

If you’re planning ahead and want to make sure everything goes smoothly for your beneficiaries after death, you have several options.

Create a will or trust

Having a will makes sure it’s crystal-clear who gets your property and who assumes the mortgage. It’s a good idea to have a lawyer draw one up for you, but there are also online services that can guide you through creating a simple will or trust for a fee.

Buy mortgage protection insurance

Mortgage protection insurance, also called mortgage life insurance, covers your mortgage debt if you pass away with a balance left on your account. You can purchase a plan from major insurance providers or potentially from your lender. This is a great option for peace of mind, but premiums are high, and you can typically only get a policy early on in your mortgage.

For clarity, this insurance isn’t the same as private mortgage insurance, which is a policy many lenders require when a borrower makes a down payment of less than 20% when taking out a first mortgage. 

Get life insurance

A life insurance policy with enough of a payout to your beneficiaries to cover the mortgage is another option. Beneficiaries can also use the funds for other expenses like funeral costs or, if they decide to keep the home, homeownership costs like property taxes or title insurance.

How Better can help

Losing a loved one is never easy, and navigating the mortgage left behind can feel overwhelming. Whether you’ve inherited a home, are stepping into the role of executor, or just want to lay an easy path for your beneficiaries, it’s crucial to understand what happens to a mortgage after death.

Better’s experienced support agents can help you through this complex process, every step of the way. Get in touch to explore your options.

...in as little as 3 minutes – no credit impact

Frequently asked questions

Who’s responsible for a mortgage after death?

If there’s a co-borrower on the mortgage, they’re on the hook for continuing mortgage payments. Otherwise, the responsibility falls to the heir or, if there’s no will or no clear heir, the executor of the estate until the matter is settled in court.

Can a family member take over a mortgage after death?

Yes, a family member can assume the mortgage if they legally inherit the property. They’ll need to notify the lender of the borrower’s death, provide documentation like the death certificate, and carry out the steps involved in taking on the loan.

If I’m the beneficiary, can I refinance instead of assuming the mortgage?

Yes, in many cases, refinancing is an option if you inherit a home and don’t want to (or can’t) assume the existing mortgage. Refinancing creates a new loan in your name, which is useful if the original loan has less than ideal terms or the lender doesn’t allow assumptions.