13 Mar What Happens to a Mortgage When Someone Dies?

When someone dies, their mortgage debt becomes part of their estate. What happens next gets complicated…it’s going to depend on several different factors, like whether there’s a co-signer on the mortgage, and whether or not the deceased had a will. For example, if you are the spouse or beneficiary of the deceased, then you have the option to assume the mortgage if you wish. 

Let’s take a closer look at what happens to a mortgage when someone dies, with scenarios for several different circumstances.

What Happens to a Mortgage If There Is No Will?

If the deceased did not have a will, the court will appoint an executor for the estate. Then the assets will be distributed according to the laws of intestate succession—this means that the deceased’s closest relatives, like their spouse or children, will inherit. 

If the heirs want to keep the property, the executor can use existing assets like the life insurance policy to pay off the mortgage. Otherwise, they can sell the property to pay off the mortgage and distribute the proceeds to the heirs.

SCENARIO

Ever since her father passed away, Lucy has been living with her elderly mother and caring for her so she doesn’t have to leave her own home. However, Lucy’s mother died without writing a will. Since Lucy is her mother’s direct descendant, she is next in line to inherit her mother’s assets, along with her two other siblings. Lucy talks to her brother and sister, and since they have no interest in the house, they agree to let Lucy buy out their share of the property.

Can I Assume a Mortgage from My Parents?

Yes, if you are the beneficiary of their will or if you are their closest living relative, you will inherit their property. 

If you want to assume responsibility for their mortgage, the first step you need to take is to notify the lender of the borrower’s death. Inform them that you have legally inherited the house, and that you wish to assume the mortgage. You will have to provide legal documentation of both the death and the inheritance. But you need to act quickly—typically, you only have about 30 days to complete this process. 

However, if your parents die with a considerable amount of debt, it could keep you from inheriting the property. The executor of the estate may need to sell the property in order to pay off the other outstanding debts. Taking steps like helping your parents set up an asset protection trust before they pass away can help you keep the family home in the family.

SCENARIO

After a long battle with cancer, Jake’s father finally passed away. Unfortunately, he died with a substantial amount of medical debt. However, he also had the foresight to purchase mortgage protection insurance. The policy will pay off the remainder of the mortgage, so Jake will be able to inherit their family home.

What Happens to a Mortgage When One Spouse Dies?

If the surviving spouse is a co-signer on the mortgage, the payments will automatically become their responsibility. If the surviving spouse is not listed on the mortgage, there must be a transfer of ownership. Either way, the surviving borrower must continue making payments in order to keep the house.

This is one reason why taking simple estate planning steps like naming your spouse as the beneficiary of your bank account is so important. 

If you pass away suddenly, your spouse will have to start making payments. Whether they are listed as a co-borrower, or they are in the process of assuming the mortgage, if they are not able to make payments, they run the risk of foreclosure. Estate planning can help you make sure that your spouse gets access to your finances right away, instead of having to wait through probate.

SCENARIO

Jane’s husband, Ted, was killed in a motorcycle accident. Their house is mortgaged in Ted’s name, and Jane is not a co-signer. However, Ted bought the house shortly after they got married. Because Arizona is a community property state, Jane will automatically inherit all the assets acquired during their marriage. She can assume responsibility for the mortgage and keep the house. 

Estate Planning Experts in the Phoenix Valley

Whether you need help navigating the probate process after a loved one passes away, or you’re ready to start the estate planning process so you can protect your family, we understand what you’re going through. Legal matters like these are a lot easier when you have a professional guiding you along the way. The team at Phelps LaClair is here for you—contact us to schedule a free estate planning consultation today. 

Photo by Lotus Design N Print on Unsplash used with permission under the Creative Commons license for commercial use 3/5/25.