Will I be Stuck with a Family Member’s Mortgage When They Die?

August 10, 2020

Forth Worth probate lawyers hear quite regularly from heirs who are shocked to learn that the property they inherited from a loved one comes with a mortgage. Now what?

It’s important to know that a mortgage does not die when the owner dies. How that mortgage is dealt with depends on a variety of factors, including language in the original owner’s estate plan and the rules of the lender.

Heirs of Property Have Federal Rights 

Those who stand to inherit a property with a mortgage have federal rights as “Successors in Interest.” A Successor in Interest is anyone who inherits an interest in the property from the deceased borrower, typically a spouse or child.

In the past, banks would refuse to communicate or work with heirs who had an interest in a property because they were not the legal owners. Instead, interested parties had to wait until the probate or estate administration process was complete to communicate about the loan or work out modifications. This is a problem because probate can take several months to several years to complete. During that time, significant unpaid balances can accumulate, or the bank may even move to start foreclosure proceedings.

Fortunately, federal laws were recently enacted to help those who can prove that they are “Successors in Interest.” This is generally done by producing a copy of the will, trust, the death certificate of the property owner, and possibly a birth certificate to prove a blood relationship if there was no estate plan at the time of death.

Once a bank establishes a person as a Successor in Interest, he or she receives the same protections under federal servicing laws as the original buyer, including the ability to get information on the loan, ask for an accounting, and enter into modification agreements. Such modification agreements may even include arrangements that allow heirs to take over the existing mortgage.

Before You Call the Bank… Call an Estate Planning Lawyer

How a mortgage is dealt with after the death of the property owner may also depend on the language in an estate plan. For example, if a senior leaves his home to his oldest daughter free and clear because she took care of him, the mortgage may need to be paid off with other assets from the estate (if available) so that the daughter inherits the property without an encumbrance. Again, each plan is different, and it can be helpful to work with an attorney who can guide you through your options when dealing with the property.

If you find yourself in this situation today and you have further questions about assuming a loved one’s mortgage or you’d like guidance in working through the estate administration process in Tarrant County, please contact our office at (817) 752-3307 to set up an appointment with one of our Fort Worth probate lawyers.

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