What Happens to a Mortgage When the Borrower Dies?


Quick Answer

When a borrower on a mortgage dies, assuming the deceased was the only borrower on the loan, typically the remaining balance of the loan becomes due. If there is a secondary borrower, such as a spouse, that person may assume the remaining balance of the loan and pay it back according to the terms already set forth, according to VA Loans.

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What Happens to a Mortgage When the Borrower Dies?
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Full Answer

According to My State Will, if a borrower dies before the mortgage is paid in full, then the remaining balance becomes the obligation of the borrower's estate. In the event that there are no other borrowers and there is no mortgage insurance to cover the loan in case of death, the loan must be paid out of the estate. If the estate does not have enough money to cover the remaining balance of the mortgage, the house can be sold and the proceeds can be used to pay off the mortgage. The property can also be deeded back to the creditor or reclaimed by the creditor in lieu of payment. Reverse Mortgage notes that the same repayment options are available to the surviving family members of the deceased if the property has a reverse mortgage loan rather than a traditional mortgage. Family members who sell the property to repay the loan must sell it within 12 months and obtain at least 95 percent of the remaining balance due from the proceeds of the sale.

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