What Are Your Mortgage Rights After the Death of a Spouse?

The death of a loved one is difficult and emotionally draining. Uncertainty about your finances just adds to the stress, especially if you’re concerned about the possibility of losing your home.

As a surviving spouse, in many cases, federal and state laws offer protections that can help you stay in your home and take over your existing mortgage loan payments if you so choose. This article will walk you through who is likely to inherit the house, what may happen to the existing mortgage, what rights and options are available to you, and the special considerations that apply to a reverse mortgage.

What Happens to Your Mortgage if Your Spouse Dies?

When your spouse dies, mortgage debt doesn’t just disappear. Two key factors determine who is ultimately responsible for paying a mortgage:

1. Whether your spouse had an estate plan or will (testate) or didn’t have a will (intestate)

2. Whether you are named as a co-borrower on the mortgage

A person who dies without a valid last will and testament is considered to have died intestate. You can die intestate if you’ve never made a will or if a court finds that your will isn’t legally valid. This can make a big difference in determining who inherits the house and what will happen to the mortgage.

What Happens to Your Mortgage if Your Spouse Had a Will?

If your spouse had a legally valid will, it probably specifies who will inherit the house. Some wills direct the executor — the person appointed to carry out the will’s instructions — to pay off the mortgage loan using estate funds.

Other types of estate planning documents can also determine who inherits the house. For example, if the house is held in a trust, the trust documents will usually control who inherits the house. 

In some states, the deed to the house can contain language that controls how ownership is transferred. These types of documents often allow surviving spouses to keep real estate out of probate. Probate is the legal process courts use to authenticate a deceased individual’s will and distribute their estate’s assets.

What Happens to Your Mortgage if Your Spouse Died Without a Will?

State law will determine how property is transferred when someone dies without a will (intestate). If your spouse died without a will, your state’s intestate succession laws will determine which family members inherit the house and the rest of the estate.

In some states, the surviving spouse automatically inherits everything. To qualify as a surviving spouse, you must have been legally married when your spouse died. 

In other states, an intestate person’s property is divided between the surviving spouse and any surviving children or other heirs. Check your state’s laws to be sure.

If You Inherit the House, Do You Also Inherit the Mortgage?

Most of the time, if you inherit the house and you’re named as a co-borrower on the mortgage, then you’ll also inherit the mortgage. In most states, you must notify the lender that your spouse has passed away. Other than this notice, you don’t have to take any action. The loan will automatically become your responsibility.

One exception is if your spouse had a mortgage life insurance policy. This is a special kind of life insurance policy that pays the outstanding mortgage balance in full if a borrower dies. Some mortgages require you to have mortgage protection insurance, but you can also purchase a policy voluntarily. Note that mortgage life insurance isn’t the same as private mortgage insurance or ordinary life insurance. You aren’t required to use ordinary life insurance proceeds to pay off a mortgage.

Inheriting a House Without Being on the Mortgage: Your Rights and Options

What happens if you inherit a house but your name isn’t on the mortgage? Don’t worry — you have options. The best choice will depend on factors like the mortgage terms, the home’s value, and your financial situation. You might consider refinancing the mortgage in your name, possibly with the help of a co-signer. Another option is selling the house and using the proceeds to pay off the remaining mortgage balance.

In many cases, you’ll also have the right to stay in the house and take over the existing mortgage. Thanks to federal law, surviving spouses can assume a mortgage as long as they meet certain criteria. If you’re unsure about your options or how to proceed, consider consulting a real estate attorney or a financial advisor. These professionals can provide specific advice tailored to your situation and help you make the best decision for your future.

Can the Mortgage Lender Demand You To Pay the Entire Mortgage Balance?

Most mortgages contain a provision known as a due-on-sale clause (sometimes called an acceleration clause), which says if the property is sold or transferred, the loan servicer may call in the loan. In other words, when a bank enforces a due-on-sale clause, the entire mortgage balance becomes due immediately. If the bank doesn’t receive payment in full, it can foreclose on the property.

Due-on-sale clauses exist to protect mortgage lenders’ rights when a property is sold. These provisions ordinarily prevent anyone from assuming the mortgage. The Garn-St. Germain Depository Institutions Act of 1982 prevents mortgage companies from enforcing due-on-sale provisions in certain situations. Some of these situations include:

• When the borrower dies and ownership transfers to the surviving joint owner or owners, in cases where the house is owned jointly by two or more people. The borrower and the other co-owner(s) must have owned the house as joint tenants.

• When the borrower’s surviving spouse, child, or relative inherits the house from the borrower. The relative(s) must live in the house after inheriting it.

• When the borrower transfers the house into a living trust. The borrower must continue to live in the house.

Additional Protections for Surviving Spouses

If you inherit a home after your spouse’s death, federal and state laws provide additional protections to ensure you’re not forced out of your home. The Garn-St. Germain Act already prevents lenders from enforcing due-on-sale clauses in certain situations, such as when a surviving spouse inherits the property. But other legal protections can make it easier for you to stay in your home and manage the mortgage.

The Consumer Financial Protection Bureau (CFPB) has enacted rules that guarantee surviving spouses the same rights as the original borrower. These rights include:

• The ability to assume the mortgage (take over payments)

• The right to apply for a loan modification

• Access to loss mitigation options, like forbearance or repayment plans, to avoid foreclosure

Many states also have laws that offer additional safeguards for surviving spouses and heirs. These laws may vary depending on where you live, but they are designed to help you stay in the home and navigate the mortgage process.

What Happens to a Reverse Mortgage After the Death of a Spouse?

A reverse mortgage — also called a Home Equity Conversion Mortgage (HECM) — is a type of loan available to homeowners who are at least 62 years old and own their homes outright or have substantial equity. Unlike a traditional mortgage, a reverse mortgage allows the homeowner to receive money from the lender as monthly payments, a lump sum, or a line of credit.

The borrower isn’t required to make monthly payments on the loan. Instead, the loan balance increases over time as payments are made to the borrower, while the homeowner’s equity in the house decreases. 

The reverse mortgage balance becomes due when one of the following happens:

• The homeowner sells the house

• The homeowner dies

• The homeowner moves out of the house for more than 12 months (for example, to enter a nursing home)

For surviving spouses, specific rules and protections determine whether they can stay in the home or will need to repay the loan balance.

Co-Borrower vs. Non-Borrowing Spouse Reverse Mortgage Rights

If your spouse had a reverse mortgage, your rights as a surviving spouse depend on whether you were listed on the loan as a co-borrower or a non-borrowing spouse.

If your name is listed as a co-borrower on the reverse mortgage, you can continue living in the home and even keep receiving payments from the reverse mortgage. The loan doesn’t become due as long as you meet the loan’s terms, such as continuing to live in the home as your primary residence.

What Are a Non-Borrowing Spouse’s Rights for Reverse Mortgages?

If you weren’t a co-borrower on the reverse mortgage, you’re considered a non-borrowing spouse. As a non-borrowing spouse, you may still have the right to stay in the home without having to immediately repay the loan, but you’ll need to meet certain Department of Housing and Urban Development (HUD) requirements:

• You were married when the reverse mortgage was made.

• If the loan was made on or after August 4, 2014, your name must also be listed as a non-borrowing spouse on the reverse mortgage documents.

• If your spouse already had the reverse mortgage before you got married, you don’t qualify as a non-borrowing spouse. However, you may still have rights to remain in the house as a surviving heir.

• You have lived in the home continuously since the loan was made.

  • The house must be your primary residence, and you must continue living in it.

  • If you sell the house or move out for more than 12 months, the loan balance will become due.

• You are current on property taxes and homeowners insurance.

  • If you fall behind on these payments, the lender can require you to repay the loan balance or face foreclosure.

• You provide required documentation within 90 days of the borrower’s death.

  • HUD requires you to notify the lender and provide proof that you meet the non-borrowing spouse criteria.

What Happens If You Don’t Meet the HUD Requirements?

If you don’t qualify as a surviving spouse under HUD’s rules, you may still have options to remain in the home. For instance, you can try:

• Negotiating with the lender: You might be able to work out an agreement to repay the home loan over time or refinance the balance.

• Selling the house: If you can’t stay in the home, you may sell it to pay off the reverse mortgage balance. Any remaining proceeds after the loan is paid will go to you or the heirs.

Let’s Summarize...

After your spouse dies, it helps to know what you can expect regarding your home and mortgage. The first step is to figure out whether any estate planning documents exist and review them to determine who will inherit the house. In most cases, this person will also inherit the mortgage. As a surviving spouse, if the house transfers to you, there are laws in place that allow you to step into your spouse’s role as the borrower on the mortgage. You also have the right to sell the house or attempt to refinance. If you have a reverse mortgage, you may be able to stay in the house without having to pay it back, so long as you meet HUD’s criteria.