Estate planning often raises important questions — especially when it comes to real estate. One common concern is: “Can you will a house with a mortgage?”
The short answer is yes — you can leave a house with an outstanding mortgage to your heirs through your will or trust. However, there are important legal and financial considerations for both the deceased homeowner and the inheritor.
In this post, we’ll explain how it works and what happens after the property is passed on.
Can You Leave a Mortgaged House in Your Will?
Yes, you can legally leave a house with a mortgage to someone in your will. The property becomes part of your estate and is transferred to the named beneficiary upon your death.
However, the mortgage doesn’t disappear — the heir will either need to:
- Take over the payments,
- Refinance the loan, or
- Sell the home to settle the debt.
What Happens to the Mortgage When You Inherit a House?
When someone inherits a house with a mortgage, here’s what typically happens:
1. Federal Law Protects Heirs
Under the Garn–St. Germain Act , lenders cannot demand full repayment immediately just because the homeowner has died. This gives heirs time to decide what to do with the property.
2. Heir Can Assume the Mortgage (if eligible)
If the heir wants to keep the home, they may be able to take over the existing mortgage by:
- Informing the lender of the death
- Providing proof of inheritance
- Demonstrating they’re financially capable of making payments
3. Refinance or Sell the Home
Alternatively, the heir can:
- Refinance into a new mortgage under their name, or
- Sell the home and use the proceeds to pay off the loan.
How to Transfer a Mortgaged House After Death
Here’s a general overview of the process:
Step 1: Probate or Trust Transfer
- If the home is in your will , it must go through probate before being transferred.
- If it’s in a revocable living trust , the transfer is usually quicker and avoids probate.
Step 2: Notify the Lender
Let the mortgage company know about the death and provide documentation like a death certificate and proof of inheritance.
Step 3: Decide What to Do with the Property
The heir can choose to live in the home, rent it out, sell it, or allow foreclosure if they don’t want to assume the mortgage.
Important Considerations
- Mortgage Insurance or Estate Taxes : Some large estates may owe taxes, and life insurance can help cover debts.
- Reverse Mortgages : If the deceased had a reverse mortgage, heirs typically must sell the home or repay the loan within a set period.
- Joint Ownership : If the home was co-owned (e.g., joint tenants with rights of survivorship), the surviving owner automatically inherits the property.
Final Thoughts
Yes, you can will a house with a mortgage , and your heirs can inherit both the property and its remaining debt. However, federal law allows them time to make decisions without immediate pressure from the lender.
Proper estate planning — including a clear will or trust — ensures a smoother transition and helps your loved ones understand their options.
Frequently Asked Questions (FAQs)
Q1: What happens to a mortgage when the homeowner dies?
The mortgage remains active, and the heir can choose to assume the payments, refinance, or sell the home to settle the debt.
Q2: Can a child inherit a house with a mortgage?
Yes, a child can inherit a mortgaged house and has options like assuming the mortgage, refinancing, or selling the home.
Q3: Do heirs have to pay the mortgage after inheriting a house?
Yes, unless the home is sold or the loan is paid off, the heir is responsible for continuing payments or settling the debt.
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