Many homeowners purchase their homes when they’re in their mid 20’s or 30’s and spend anywhere between 15 to 30 years repaying their home loans. Since most new homeowners are so young, they’re generally healthy and professionally growing, so mortgage payments are manageable. However, unexpected life events can take the life of even a healthy individual. So what happens to outstanding mortgage debt if you die before it’s repaid?
Mortgage and Estate Plan Considerations
Fortunately, no matter how large or minuscule your remaining balance might be, your outstanding mortgage debt won’t be passed to your family members if you die. However, the only exception is if you’re married and the house is owned jointly. If this is the case, it’s likely that your spouse is the co-signer, who would then be responsible for the rest of the payment. A life insurance policy that pays immediately upon your death can protect your spouse from having to pay off the remainder of the mortgage single-handedly. An unprotected spouse will be left with the mortgage debt and may have to sell the home to satisfy the debt.
However, if you’re married and you own the home alone, it’s important to have an estate plan. Without the estate plan, your spouse and family members could lose the home after you pass. For older homeowners, there are a few considerations to take to protect their spouses and loved ones.
Establish a trust. A land trust or revocable trust establishes a process of who will receive the property should you pass.
Sell or give the home to your children. By doing this, older citizens can ensure that their family has the home after their death.
Include the home in your deed. While signing over the deed doesn’t change mortgage considerations, it means that your kids can avoid probate. However, this is dangerous because now the property is subject to your kids’ liability. In other words, if you sign over the deed to your home and your child gets sued, your property could be at stake.
Write a will. Including the property in the will won’t prevent it from going through probate, but it’s better than no written documentation at all.