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What Happens to a Home with a Mortgage Upon the Borrower’s Death?


A common issue when a homeowner dies is the outstanding balance on a mortgage loan on the decedent’s homestead property.  In this case, the beneficiary or next of kin who inherits the home will have to decide what to do with the property.   Many inheritors of the homestead property struggle to keep-up with the mortgage after the original homeowner has died.

In Florida, there are three ways beneficiaries can inherit a home with a mortgage:

  • Deed
  • Will
  • Trust

What happens to a home with a mortgage upon your death?

When a borrower dies, their mortgage loan doesn’t go anywhere. What happens to a home with a mortgage upon the borrower’s death depends on a variety of factors.

The most common scenarios that could happen when a borrower dies before their mortgage is satisfied include:

  1. The borrower’s heirs take over the mortgage

In many cases, mortgages can be transferred to a beneficiary or next of kin when the borrower passes away. When an heir assumes the mortgage on an inherited home, they will keep making the same monthly payments with the same interest rate unless they refinance.

  1. The heirs refinance the mortgage loan

If the beneficiary or next of kin who inherited property with a mortgage wants to keep the home, they may be able to refinance the loan to reduce the monthly payment or lower the interest rate.

  1. The estate pays off the mortgage loan

In some cases, when the decedent’s estate has enough funds, it may pay off the outstanding mortgage balance. Typically, this can happen when the borrower created estate planning documents directing their beneficiaries to use estate or trust funds to pay off the loan.

  1. The heirs sell the home or don’t do anything at all

If the borrower’s heirs cannot afford the monthly payments to continue paying off the debt, they can sell the home or don’t do anything at all.

In fact, walking away may be a smart decision when the home is valued less than the remaining loan balance. However, it is essential to work with an experienced attorney before you make that decision.

  1. The borrower got a reverse mortgage before the death

If the borrower takes out a reverse mortgage, the loan will become due and payable upon their death. After the death, the borrower’s heirs can inherit the home if they can pay the mortgage balance without having to sell the home.

  1. The home with a mortgage is seized to pay the estate’s debts

In some cases, the borrower’s heirs may not inherit their home if the decedent leaves behind a lot of unpaid debt. In that scenario, the property may be seized by the Personal Representative to pay other debts.

If you are thinking of creating an estate plan but have a mortgaged home, you should consult with a St. Petersburg estate planning lawyer to help you protect your property. Schedule a consultation with our attorneys at Legacy Protection Lawyers, LLP. Call at 727-471-5868.

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