Who Pays a Mortgage When Someone Dies?

When someone dies, you may be worried about who pays the mortgage while the estate is being settled. The answer depends on whose name is on the loan and who owns the home. The executor of the estate will be responsible for paying the bills from the estate until the estate is officially settled. The money should come out of the estate.

Other Signers on the Mortgage

If there is more than one signer on the mortgage, when one signer dies, the other signers become legally responsible for paying off the loan. For example, if you and your spouse signed the loan documents together, and your spouse passes away, you would become solely responsible for the loan. If you cosigned to help your child qualify for a mortgage and the child dies, you become responsible for paying off the mortgage and making up any difference in what is owed after the sale of the home.

Estate Becomes Responsible

The estate becomes responsible for paying the mortgage if the loan has no other signers. The mortgage should be paid out of money that belongs to the estate and not out the executor's pockets. If the home is owned solely by the deceased, it will need to be sold to settle the estate. If the deceased and others own the home, the home must be sold and the money divided among the owners, with the deceased person's portion going to the estate. Another owner can buy out the estate by paying the portion that was owed to the estate.

Keeping the Home

If the spouse of the deceased still lives in the home, she may choose to pay off the mortgage to keep the home. However, the estate must stand good for all outstanding debts. If the estate cannot cover all debts and if the deed of the mortgage is not in her name, she may have no legal right to the home. Instead she must pay off all outstanding debts of her spouse to keep her home. She can use life insurance money or her own assets to do this.

Mortgage with Not Enough Assets

If the estate does not have adequate assets to settle the debs in the estate, the assets must be sold to stand for the debts. If there is any remaining debt, the executor should send a letter stating that all assets have been applied toward debt and the remaining debts must be forgiven. Because the mortgage is attached to the house, any proceeds from the sale of the home should be applied to the mortgage before any other debts. If the deceased owes more than the home is worth, the remainder of the debt should be forgiven.