After the death of a spouse, surviving spouses often have the right to stay in their home and take over the mortgage under federal and state laws. If you inherit the house, you can assume the mortgage without triggering a due-on-sale clause, thanks to the Garn-St. Germain Act. If your name isnât on the mortgage, you may still have options, like refinancing or selling the home to pay off the balance.
The death of a loved one is difficult and emotionally draining. Uncertainty about your finances just adds to the stress, especially if youâre concerned about the possibility of losing your home.
As a surviving spouse, in many cases, federal and state laws offer protections that can help you stay in your home and take over your existing mortgage loan payments if you so choose. This article will walk you through who is likely to inherit the house, what may happen to the existing mortgage, what rights and options are available to you, and the special considerations that apply to a reverse mortgage.
Losing a spouse is one of the most difficult experiences anyone can go through. The emotional toll is immense, and the logistical challenges can seem endless. One major source of stress for many surviving spouses is uncertainty about the fate of the family home and mortgage.
As a grieving widow or widower, you may be worried the lender will call the mortgage loan due and even foreclose on your home. Fortunately, federal and state laws offer important protections in these traumatic circumstances. Read on to learn more about your rights and options if your spouse who held the mortgage passes away.
What Happens to the Mortgage When a Spouse Dies?
When a married homeowner with a mortgage dies, the loan does not automatically disappear. Who becomes responsible for the remaining mortgage debt depends largely on two key factors:
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Whether the surviving spouse was a co-signer on the mortgage: If you were a co-borrower on the mortgage loan, you remain liable for the debt and can continue making payments as normal.
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Whether the deceased spouse had a will: If your spouse died with a legally valid will, it typically specifies who inherits property like the family home. If your spouse died intestate (without a will), state law determines who inherits the home.
In most cases, the surviving spouse ends up acquiring the home either through inheritance provisions or state law And along with the house often comes the attached mortgage.
You Can Assume the Mortgage as a Surviving Spouse
Let’s say you inherit the family home but were never a co-signer on your deceased spouse’s mortgage This situation triggers a “due-on-sale” clause, which gives lenders the right to demand full repayment of the loan if a property transfers to a new owner
Thanks to a federal law called the Garn-St. Germain Depository Institutions Act, lenders cannot enforce due-on-sale clauses for certain types of transfers after a death, including:
- Surviving spouse inheriting the property
- Property transferring to the deceased borrower’s child or relative who will live in the home
This means as a surviving spouse, you have the right to assume the mortgage instead of the bank calling the loan due. Assuming the mortgage means you agree to take over responsibility for making the monthly payments and complying with other loan terms.
Before assuming the mortgage, however contact the lender to discuss the specific requirements. You may need to provide documents verifying the death and your status as the surviving spouse. The lender also can require you to qualify financially for the loan based on factors like your income credit score, and existing debt obligations.
What If You Can’t Assume the Mortgage? Alternative Options
If you don’t meet the lender’s criteria to assume the mortgage, all hope is not lost. As the surviving spouse and rightful heir, you have several alternatives to explore:
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Refinance the mortgage: Take out a new mortgage in your name only, using the home as collateral. This may allow you to secure better loan terms.
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Sell the home: You can choose to sell the property and use the sale proceeds to pay off the mortgage balance. Any leftover funds go to you and any other beneficiaries.
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Obtain a reverse mortgage: In some cases, a reverse mortgage can provide funds to pay off an existing forward mortgage. Requirements include being over age 62 and having sufficient home equity.
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Negotiate with the lender: There may be an option to negotiate a repayment plan, loan modification, or other solution with the lender to avoid foreclosure.
Consulting with a real estate attorney can help you fully understand all your legal protections and alternatives for dealing with the mortgage.
Special Considerations for Reverse Mortgages
If your deceased spouse had a reverse mortgage, additional rules come into play. A reverse mortgage allows homeowners aged 62 and up to tap into their home equity as a loan that doesn’t require monthly payments.
If you were a co-borrower on your late spouse’s reverse mortgage, you can generally remain in the home and keep receiving loan proceeds. However, if you were not a co-borrower, to avoid foreclosure you must prove you meet certain criteria within 90 days of your spouse’s death, including:
- You lived in the home at the time the reverse mortgage was originated
- You still occupy the home as your primary residence
- You remain current on taxes, insurance, maintenance, and other property charges
If you don’t meet these requirements, the reverse mortgage balance will need to be repaid, but the lender must consider alternatives to foreclosure.
Don’t Lose Hope: You Have Options
Losing a husband is painful enough without having to worry about losing your home too. Take comfort in knowing federal and state laws exist to protect surviving spouses from unwarranted foreclosures. If you find yourself unsure about your rights regarding the mortgage, don’t hesitate to seek legal guidance. With the right information and support, you can make it through this difficult transition.
Additional Protections for Surviving Spouses
If you inherit a home after your spouseâs death, federal and state laws provide additional protections to ensure youâre not forced out of your home. The Garn-St. Germain Act already prevents lenders from enforcing due-on-sale clauses in certain situations, such as when a surviving spouse inherits the property. But other legal protections can make it easier for you to stay in your home and manage the mortgage.
The Consumer Financial Protection Bureau (CFPB) has enacted rules that guarantee surviving spouses the same rights as the original borrower. These rights include:
- The ability to assume the mortgage (take over payments)
- The right to apply for a loan modification
- Access to loss mitigation options, like forbearance or repayment plans, to avoid foreclosure
Many states also have laws that offer additional safeguards for surviving spouses and heirs. These laws may vary depending on where you live, but they are designed to help you stay in the home and navigate the mortgage process.
What Happens to Your Mortgage if Your Spouse Had a Will?
If your spouse had a legally valid will, it probably specifies who will inherit the house. Some wills direct the executor â the person appointed to carry out the willâs instructions â to pay off the mortgage loan using estate funds.
Other types of estate planning documents can also determine who inherits the house. For example, if the house is held in a trust, the trust documents will usually control who inherits the house.Â
In some states, the deed to the house can contain language that controls how ownership is transferred. These types of documents often allow surviving spouses to keep real estate out of probate. Probate is the legal process courts use to authenticate a deceased individualâs will and distribute their estateâs assets.
What If My Spouse Dies and I’m Not On The Mortgage?
FAQ
Do I have to tell my mortgage company my husband died?
What happens to the mortgage if my husband dies?
How does a mortgage company know when someone dies?
Servicers are typically made aware of a borrower’s death through the results of this monthly audit, but occasionally an heir or family member will contact the …
Can a mortgage stay in a deceased person’s name?
Can a bank call a mortgage if a spouse dies?
Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement. A bank may be able to call a mortgage when a spouse dies. your spouse who has a mortgage dies, you may be able to keep making payments and remain in
What happens if a spouse dies on a mortgage?
If the deceased spouse was the sole signatory on the mortgage, notifying the bank promptly is critical. Mortgage agreements often require notification of the borrower’s death. Failure to inform the lender can lead to complications, such as potential default, as the bank may continue to expect payments from the deceased borrower.
Can a surviving spouse get a mortgage if a spouse dies?
Federal laws offer protections for surviving spouses facing mortgage challenges. The Garn-St. Germain Depository Institutions Act of 1982 prohibits lenders from enforcing a due-on-sale clause after a borrower’s death if the property is transferred to a relative, including a surviving spouse.
What happens if both spouses are named on a mortgage?
When both spouses are named on the mortgage, the surviving spouse typically becomes solely responsible for the remaining mortgage payments; terms and conditions remain unchanged. This transition is generally straightforward as long as the surviving spouse can continue making payments.
Can a surviving spouse keep a home if a borrower dies?
In the past, mortgage lenders treated a borrower’s death and subsequent transfer of the home to the surviving spouse as invoking a due-on-sale clause. If a surviving spouse wanted to keep the home, that spouse had to pay off the mortgage debt in full or face foreclosure.
Can a deceased spouse pay off a mortgage?
If maintaining the mortgage payments is not feasible, selling the property may be necessary. The proceeds from the sale can be used to pay off the remaining mortgage balance. If the deceased spouse has a life insurance policy, the payout can be used to pay off the mortgage.