What Happens to a Mortgage After the Owner Dies?

On behalf of The Law Office of Wickersham and Bowers posted in Estate Planning on Monday May 8th, 2022.

Though you’re probably preoccupied with a million other things after a loved one has died, you’ll have to address one crucial topic: “What happens to the house?”

A will or probate is often used to determine who gets a home when a homeowner passes away. But what about a house with a loan on it? Are your relatives liable for your mortgage debts if you pass away? What happens to the surviving family members who are still living in the house?

The word mortgage is derived from a French term that means “death pledge” — meaning a mortgage does not simply vanish when the lien holder passes away. The lender still needs to be paid, or they will likely foreclose on the home. If the property has outstanding home equity loans or lines of credit, the same rules apply. A mortgage is a lien that lasts until the loan is paid off, even if the borrower passes away.

Who Assumes The Payment?

If a mortgage has a co-borrower or co-signer, the solution is straightforward: the other party can keep making payments on the loan.

If the deceased has a surviving spouse, federal law permits them to take over the mortgage instead of paying the full total back to the lender. They will need to show financial ability and creditworthiness, however.

If the deceased leaves the title to someone else, this person only acquires the title to the property, not the mortgage. The inheritor has no personal obligation to make loan payments until the assuming process is completed because the person’s credit isn’t tied to the loan installments. They aren’t legally obligated to repay the loan.

If none of these scenarios apply and no one takes over the mortgage, the mortgage servicer will begin the foreclosure process.

Have the Conversation

Numerous things go into end-of-life preparations. It’s crucial to think about how your choices today will impact your loved ones once you’re gone.

Consider any other debts you may leave for your family after you die, in addition to your mortgage. Although discussing your mortality isn’t often the most uplifting issue, doing so now may provide you and your loved ones with some peace of mind in the future.

Reasons You Need a Prenuptial Agreement

On behalf of The Law Office of Wickersham and Bowers posted in Family Law on Monday May 19h, 2022.

A prenuptial agreement defines the parameters of your finances before marriage, including property rights and more. A lawyer should thoroughly review every prenuptial agreement, with one attorney representing you and the other representing your future spouse.

You may think prenups are only for people with substantial financial resources. However, if any of the following apply to you or your situation, a prenuptial agreement should be discussed.

One (Or Both) of You Has Children

A prenuptial agreement should be considered if one of you had children from a previous marriage or relationship.

Prenuptial agreements can be written to protect your children’s assets and future earnings. This property or income might ordinarily be considered part of the marital estate and so be divided. A premarital agreement ensures that children’s inheritance and future maintenance are not entangled in the divorce process.

There is Substantial Debt

Debt is an unfortunate aspect of life, and people can carry their debt into the marriage. The non-burdened party is unlikely to want to be saddled with an enormous bill should the marriage go sour. 

A prenuptial agreement can help limit one partner’s exposure to the debts of the other. Any agreement should spell out each partner’s individual debts and assets prior to the marriage, allowing for a clear distinction between those debts and debts incurred by the couple during the marriage.

Someone Plans to be a Stay At Home Parent

In the event of a divorce, it might be difficult or impossible for one party to re-establish their profession or financial footing after pausing or giving up their work to raise their children. A prenuptial agreement protects stay-at-home parents’ interests in marital assets. It ensures that these agreements are documented in the event that the marriage breaks and their profession is put on hold. 

One of You Has Pets

Including pets in your prenuptial agreement is normal, especially if the pets are costly. This will ensure that any animals you share with your spouse are returned to their rightful owners if the marriage ends in divorce. Although pet ownership is rarely a point of contention in divorce proceedings, some people do use it as a negotiating tool.