Owning a home is part of the American Dream. But in today’s world, it’s more along the lines of having a hefty mortgage payment that you’ll probably have until the day you die. And if that is the case, what happens to your mortgage when you die? There are a few things that could happen, but it really just depends on the actions you take while you’re alive.
What Happens To Your Mortgage When You Die?
If you do pass away with some of your mortgage left to pay off, chances are none of your family members will have to directly pay it off. The only person who will be in line to pay off the remaining balance would be the person who co-signed with you, which may be your surviving spouse. However, if he or she continues to live in the house, it may not prove to be much of a problem. Your spouse may also choose to use your life insurance policy to pay off what remains of the mortgage, granted that you have one that pays out upon your death. Or, they may choose to just sell the house to pay it off in its entirety.
If you’re the sole signer of your mortgage, your lender has the power to decide the fate of your home, which could mean anything. However, you can ensure your home stays in your family by stating in your will that it will go to an heir. Unfortunately, that doesn’t mean they will necessarily have the capability to continue making mortgage payments. This means that, sadly, they would likely have to sell the house anyway to pay off the mortgage.
But don’t worry—there are still certain circumstances that could allow your home to remain in your family. Your mortgage lender may call due your mortgage debt if your estate contains a lot of liquid assets, as he or she will be able to use them to satisfy the balance on the loan. While this may not seem like the greatest option since it will reduce the amount of money your surviving spouse or heirs may keep, it is an option that will ensure the bank doesn’t take possession of your home.
Your home is still liable to be foreclosed upon by your mortgage lender if your estate is too small to satisfy your debt. However, this process can be stopped by the executor of your estate at anytime if a willing heir steps forward and makes payments on your mortgage. Unfortunately, your home will most likely be sold through a sheriff’s auction if that does not occur.
Do you have anything else to add about what happens to your mortgage when you die? Let us know!
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