What Happens To Your Mortgage After You Die?

Have you ever wondered what will happen to your mortgage after you die? The simple answer is that your mortgage will not be forgiven when you die. A mortgage is a lien against a piece of real estate and must be repaid.

If both you and your spouse are listed as co-owners on the loan, should one of you pass away, nothing needs to be done as far as the mortgage is concerned. The surviving spouse becomes the sole borrower by default and becomes legally responsible for the entire amount of the loan.

Under federal law, if you pass your home on to a relative, the lender must allow your family member to assume the mortgage when they inherit the property. But they don’t have to keep the mortgage in place. They can refinance the mortgage if they can find a better loan, or they can simply pay it off entirely.

In some cases, an heir may not want the property, or may be unable to afford the mortgage. In those cases, selling the home is an option.

Reverse Mortgages

If you are a married couple that has taken out a reverse mortgage and one of you dies, nothing happens to your mortgage, as long as one of you is still living in the home. But when the last surviving spouse dies or permanently moves out of the house, the loan becomes due and payable.

At that point, your estate essentially has 12 months to pay the loan off, which is usually facilitated by selling the home. But selling the home is not required, and if your family wants to keep the house, they can. But, again, the estate will have to come up with the money to pay off the reverse mortgage balance.

Tips to Help Your Heirs Deal With Your Mortgage After You Pass Away

There are some basic estate planning steps that you can take now to make it easier for your heirs to deal with your mortgage after you pass away. Consult with an experienced estate planning attorney who can advise you on how best to accomplish the following goals:

Purchase Life Insurance

Life insurance is the best way to provide the cash your heirs will need to pay off your mortgage or to make the monthly payments.

Consider Other Ownership Options

A qualified estate planning attorney can assess whether it would be advantageous for you to place your real estate into a trust or LLC that you own for estate planning purposes.

Keep Cash on Hand

If you believe that your heirs will have a difficult time making the mortgage payments after you die, it’s a good idea to make immediate funds available to them. This could be in a Pay-On-Death or Transfer-On-Death account, or some other vehicle that provides them with access to immediate cash.

Discuss Your Mortgage With Your Heirs

Talk to your heirs about your mortgage, and what you would like to have happen with it after you die. This can avoid adding a great deal of stress to the grief that your loved ones will be dealing with after you pass away.

Consult With an Experienced Estate Planning Attorney at Speedwell Law

Since the rules regarding how title to real estate transfers after the owner dies can be complicated, it is important that you consult with an experienced estate planning attorney if you have any questions. In Virginia, contact Speedwell Law at (703) 553-2577 or use the contact form on our website to arrange a consultation with an experienced Virginia estate planning attorney. Call us today!

The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.