If you die owing money on your mortgage, the balance doesn't just disappear. Depending on what happens with your estate, your beneficiaries would have to continue making loan payments, sell the house or transfer ownership to the lender.
That's an oversimplification, of course: There are a lot of variables depending on your situation and ways you can make the process easier for your loved ones.
Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.
10–30 years
620
5% for conventional loans, 3.5% for FHA loans, 0% for VA loans, 10.01% for jumbo loan
10, 15 or 30 years for fixed-term conventional loans, 30-year VA and FHA loans. Custom mortgages with fixed-rate terms from 8 to 29 years.
620 for conventional, 500 for FHA
0% for VA, 1% for RocketONE+, 3% for conventional, 3.5% for FHA, 10% to 15% for jumbo
What happens to your mortgage when you die?
- What happens to your mortgage if you die without a will
- What happens if your spouse is not listed on the mortgage?
- What happens if the house is divided among multiple beneficiaries?
- What if you inherit a property with a reverse mortgage?
- How to assume the mortgage on an inherited property
- Estate planning with a mortgage
- FAQs
What happens to your mortgage if you die without a will?
If someone dies without a will, or dies "intestate," the state usually appoints an executor to keep up mortgage payments from their assets or life insurance policy while the estate is settled.
If there aren't enough funds, the mortgage servicer could begin foreclosure proceedings.
Without a will, your assets are usually distributed according to your state's intestacy laws. In most cases, that means surviving family members inherit the property. They can either take over payments and keep the house or arrange to sell and use the proceeds to pay off the mortgage.
What happens if your spouse is not listed on the mortgage?
If a couple took out a mortgage together, also known as "tenancy by the entirety," then the surviving spouse automatically inherits the property and must continue making mortgage payments.
If the surviving spouse is not listed on the mortgage, however, there must be transfer of ownership before they can continue making payments or sell the property.
What happens if the house is divided among multiple beneficiaries?
If a mortgaged property is bequeathed to more than one beneficiary, they can become co-borrowers and continue loan payments. They can also sell the property and use the proceeds to pay off the remaining balance. If only one beneficiary wants to keep the home, they can buy out the others.
If the beneficiaries cannot reach a consensus, however, the court may require the sale of the property and use the proceeds to pay off the lender.
What if you inherit a property with a reverse mortgage?
When someone with a reverse mortgage dies, the loan becomes due and payable. The beneficiary has a certain window, usually six months, to repay the full loan balance (or 95% of its appraised value, whichever is less).
They can also choose to sell the property and use the proceeds to repay the lender. (Any additional funds can be kept by the beneficiary.)
They can also transfer ownership to the lender in what's known as a deed-in-lieu of foreclosure.
How to assume the mortgage on an inherited property
If you've inherited a home with an outstanding mortgage, there are several steps to follow:
1. Notify the lender
As soon as possible, notify the lender the borrower has died and that you have legally inherited the house. You will have to provide the death certificate, the deed and and documentation of the inheritance.
2. Continue to make regular payments
If you intend to keep the home, you'll have to start making payments while in the process of assuming the mortgage or else risk foreclosure. (If you can't afford the payments, you can consider refinancing.)
3. Sign an assumption agreement
Once you provide the appropriate paperwork, the lender will check your credit history, income and assets to ensure you have the means to assume the mortgage. If you're approved, they'll draw up an assumption agreement and you'll officially become responsible for the loan.
Estate planning if you have a mortgage
Nobody wants to add to their loved ones' grief by leaving them with a messy financial situation. If you have a mortgage, there are some steps you can take to protect your beneficiaries.
Draft a will or trust
You can decide who receives your home with a will or living trust. Otherwise, the choice will be left to an executor appointed by the state.
While many people work with an attorney, you can draft a simple will or trust using a company like Trust & Will or FreeWill, both of which made our list of the top online will-makers.
Trust & Will
Cost
$199 for an individual will, $299 for a joint will; $499 for an individual trust, $599 for a joint trust; $49 per year for membership
Estate planning options available
Wills, living wills, trusts, power of attorney
Access to legal assistance
Yes, for a flat $299 fee
Availability
Trust & Will can prepare wills in all 50 U.S. states and Washington, D.C., and trusts in all states except Louisiana.
Standout Features
Online willmaker Trust & Will offers an easy-to-follow question-and-answer format and access to attorneys who can provide a line-by-line review or advise on estate and tax-planning topics. You can print your documents or have them shipped to you.
Pros
- User-friendly design with clear instructions
- Free updates with basic membership
- Access to attorney support and probate case managers
- Robust customer service is available seven days a week
Cons
- Membership costs $49 per year
- Doesn't offer attorney support in every state
FreeWill Online Will Maker
Cost
Free
Estate planning options
Wills, living wills, trusts, power of attorney, revocable living trusts (only in California)
Access to legal assistance
No
Availability
FreeWill is licensed to draft wills and trusts in all 50 U.S. states and Washington, D.C.
Standout features
FreeWill uses a simple question-and-answer format to guide you through the will-making process. It includes a process for charity donations and options for pet care. While FreeWill doesn't offer joint wills, you can duplicate a will for your spouse.
Pros
- Easy-to-follow quick process
- Completely free
- Bank-level encryption
Cons
- Not suitable for complex situations
- No access to attorneys
Mortgage life insurance
If you die with an outstanding balance on your home loan, mortgage life insurance, also known as mortgage protection insurance, pays out directly to your lender.
Insurance companies like Nationwide and Aflac offer mortgage life insurance, or you may be able to buy it from your lender.
Policies often carry high premiums, however, and are usually only available in the first few years of your mortgage.
Life insurance
A life insurance policy could also be used to pay off a mortgage, while still giving your beneficiaries flexibility to use the funds at their discretion.
Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.
Amica offers a level term life insurance and whole life insurance policies payable for 20 years or until ages 65 or 100. Both include a terminal illness rider at no extra charge.
Terms Apply
Pacific Life offers term, permanent and no-exam life insurance, with an accelerated death benefit included at no charge.
Terms Apply
FAQs
Do heirs need to requalify for an inherited mortgage?
Generally, beneficiaries can assume an existing mortgage under the same terms without having to requalify. But you should check the terms of the original mortgage agreement to be sure.
Should I pay off my mortgage before I retire?
There's no rule about paying off your mortgage before retiring. It may depend on your mortgage rate: If your home is locked in below 3%, there's no reason to rush paying it off. You could focus on paying off high-interest debts like unpaid credit card bills.
What happens to a home equity loan or HELOC if the borrower dies?
If there is an outstanding home equity loan or HELOC, the lender can require the beneficiary to pay the debt immediately, which may require the sale of the property. Many lenders may allow a deferment period or let you take over the decedent's payment plan.
Can I refinance a property I inherited?
Once your name is on the deed, you can apply for refinancing to get a better rate or terms, lower payments or even cash. Whether you are approved, however, depends on your credit, home equity, debts, the state of the house and other factors.
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