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When I die, what will happen to my mortgage?

When individuals do estate planning, they traditionally plan for how their assets can help the next generation. But sometimes, those assets can be more of a burden than a blessing. An easy example of this is inheriting a house with an active mortgage. If this house is worth $200,000 and there is still $100,000 left to pay off, what are your options as the inheritor?

When a piece of property with a mortgage attached is left to an heir, the decedent’s will or trust can specify whether or not the rest of the mortgage should be paid off in full, whether it should be partially paid depending on funds available, or if the debt should be transferred with the property. Once the property has been transferred, the new owner can do with it as they please, either selling it or keeping it.

However, even if there are funds in the estate to pay off the mortgage, or the new owner has the means to pay off the balance, it is important to remember some of the other costs associated with a home that the heir will also be taking on. In addition to traditional utilities, there are also property taxes, homeowners insurance, and, if in an applicable neighborhood, HOA dues. 

If there are no emotional connections to the property, once the heirs take ownership, if they decide the additional costs with the house are too steep, then they are free to sell it. But if there is a special history associated with the property, and selling it is a matter of last resort, effective estate planning should consider the potential heirs financial situation in an attempt to ensure that there are also funds available to ensure that the property in question remains with the intended recipient. Imagine inheriting the family cabin, but not having the resources to pay taxes or perform necessary maintenance on it, so it has to be sold.

There are other, additional factors to consider if your house has a reverse mortgage. Circumstances will vary depending on your specific mortgage agreement, but the three primary options for heirs of property with a reverse mortgage are:

-Pay back the loan,
-Sell the home and use the proceeds from the sale to repay the reverse mortgage, or
– Deed the home to the lender.

While mortgages and reverse mortgages can complicate the estate planning process, proper planning can remove some of the confusion and prepare your loved ones to handle the process when the time comes.

Contact us Today

It’s never too early to begin estate planning. No one knows what the future holds, but with a plan in place that provides for your own future needs and those of your loved ones, you can proceed with peace of mind. If you or a friend or loved one are considering estate planning for the first time, or are in need of updating an existing plan, please contact the attorney at Skillern Law Firm, PLLC by phone at 918-805-2511 or Feel free to also book an appointment with our firm using our Book an Appointment Online page!

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