What happens to a mortgage when the borrower dies?

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What happens to a mortgage when the borrower dies?

My dad died 3 years ago; she lelf his home to my sister and I. She is the executer but has not opened probate because she is afraid that the lender will forclose on the home since the mortgage is not in her name. She has been paying the mortgage payments but is not able to qualify for a loan in her name. There is $180,000 in equity. Can we sell home while in probate so we can pay off mortgage even though neither of our names is on house?

Asked on October 8, 2012 under Estate Planning, California

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

A person who inherits a property becomes responsible for paying any mortgages on it. As a general rule, unless the mortgage has an "acceleration clause" that is triggered by the death of the borrower, a lender is typically required to continue to accept the monthly payment until the mortgage's maturity date. This can be of great benefit tothe person who is inheriting since they do not have to go through the lender's application process to qualify for the mortgage.

By way of explaination, an acceleration clause is a provision in a mortgage that allows the lender to demand immediate payment in full of the remaining balance of the mortgage if certain events occur (such as the sale of the property, late payments or the refinance of the mortgage). However, typically it is rare to find such clauses that provide for acceleration upon the death of a property owner.

Bottom line, as long as all mortgage payments are made on time, you should be fine.


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