Death does not end a mortgage.
Death of a borrower usually does not cancel the mortgage, as the mortgage goes with the property. The bank can foreclose on the property to recover the debt, any cash in the deceased's estate can be used to pay off the mortgage or a person either surviving the deceased, or named in the will, can take out a new mortgage to purchase the property and pay off the old mortgage.
Mortgage
As the legal information website MyStateWill explains, mortgages as most people imagine them actually come in two parts: the note and the mortgage. The note acts as a contract and sets out the terms of the loan and the rights and responsibilities of the lender and the borrower. The mortgage puts the property up as collateral, meaning the property can repossessed and sold to cover the loan, for the loan and sticks with the property independent of the owner.
Ownership and Mortgage
If anything happens to the original borrower, the mortgage remains the same and stays with the property. If the borrower dies, the debt sticks with the property, but the balance of the mortgage is due and the bank has a right to repossess and sell the property if the debt is not paid.
Estates
When a person dies, everything they own becomes part of their estate. If a person dies and leaves behind property with a mortgage, any cash in the estate can be used to pay the bank, or other valuables in the estate can be sold and the proceeds can be used to pay off the mortgage.
Purchasing
Oftentimes, the cash in a person's estate is not enough to pay off the mortgage, but one of the heirs wants to keep the property. MyStateWill outlines this scenario, stating that the property must be sold to cover the mortgage if the estate does not have enough cash to pay it off, but that the property can be sold to an heir who often takes out a new mortgage to pay for the purchase. Once the heir buys the property and pays the bank, the bank cancels the original mortgage.
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