When home buyers take out a mortgage loan to finance the purchase of their residence, they sign an agreement to pay off that loan in installments. But what happens when mortgage lenders die before they finish paying off their home loans? The answer to this question depends on two main factors: how many borrowers have signed the mortgage documents and how many dollars are left on the loan.
More than One Mortgagee
If more than one borrower signs onto a mortgage -- as often happens in the case of a husband and wife purchasing a home together -- the surviving mortgagee must continue making mortgage payments after the death of one mortgage holder. Surviving borrowers will continue making these payments until they pay off the loan, refinance it or sell the house.
When Only Surviving Borrower Dies
Matters become more complicated when the last mortgage holder passes away before paying off a home loan. In such cases, the borrower's estate usually pays off the remainder of the mortgage loan. Savings, investment dollars, proceeds from the sale of vehicles and other estate dollars will pay off the rest of the deceased mortgage holder's loan.
If there's Not Enough Dollars
If there aren't enough dollars in the deceased's estate, the bank or mortgage company servicing the mortgage loan will take over ownership of the property. The lender will then sell the home to pay off the remainder of the home loan.
Heirs
The sons and daughters of deceased parents don't have to worry about paying off the unpaid portion of their mothers' and fathers' mortgage loans. Mortgage lenders can't force the heirs of deceased mortgage holders to pay off the loan dollars left behind when a home owner passes away before paying off their mortgage loans.
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