Who Inherits My Mortgage?
There are several options to help keep a family home in the family if you die before the mortgage is paid in full. If you still owe money on the house when you die, someone still has to pay off that debt. If no one can afford to pay for the house, even in monthly payments, then the bank will seize the house and sell it to reclaim the debt remaining on the property.
A good estate planning attorney will help you select the right option for you and your family. Most importantly, your lawyer will review your current mortgage contract to see what the bank will allow for repayment after your passing. Your attorney will be able to structure your estate plan to distribute your estate’s funds to pay off the mortgage balance first if you wish. The attorney will also be able to create stipulations that allow for options such as guaranteed residency for your spouse and co-ownership for your children.
If you are young enough to qualify for an affordable life insurance policy, your lawyer can arrange a low monthly payment for a term life policy that will pay off your mortgage if you pass away before you pay off the loan. These life insurance policies are typically known as mortgage insurance (not to be confused with PMI) and change over time to reflect what you owe on the mortgage.
Even if you still have a mortgage, there may be significant financial equity in your home. Money can cause significant dissent in the closest of families. If you are not specific, or if your will is out of date, your family could lose the home, and each other, after your passing.
