A client recently asked a common question: What happens if I still have a mortgage when I die? While this is a common question, the answer can be difficult: It depends.
If you have an active mortgage when you die, the loan may still be in effect. The terms of your will may decide what happens to your property and the mortgage on it.
If you have no cosigner and have not left your home to any heirs in your will, then the mortgage dies with you. If you die without a will, Illinois intestate laws determine who inherits your property. That does not mean your beneficiaries get the property free and clear. If they do not want the house, they are not obligated to pay the remaining mortgage. For benefactors that do want the home, they will be responsible to pay the mortgage.
If you have a cosigner on the mortgage loan, then that person is still responsible for the remaining amount owed on your mortgage. The cosigner can renegotiate the terms with the lending company or sell the property and pay off the balance.
If you pass away and leave the home to your benefactors, they have options with the property.
Take over the mortgage
The person who inherited the property can work with the lending company to renegotiate the terms and payments and keep the property.
Sell the house
If no one wants to keep the property, your heirs can sell the house and use the money to pay off the loan’s remaining balance.
Use other funds
Your spouse or heirs can use life insurance money or other financial means left in the will to pay off the property. This allows your heirs to keep the house.
An experienced estate planning attorney can help draft your will and ensure your property is taken care of after you pass away.
Our attorneys understand that each will has its unique problems to solve. We will help you overcome the mortgage challenges during the estate planning process. Whether you wish to leave it to your spouse or your heirs, we can help you leave your home to your loved ones.
Contact an experienced estate planning attorney at Estate and Probate Legal Group to understand how a mortgage will affect your estate plan. Call 630-864-5835 to speak to an experienced estate planning attorney. Contact us today at Estate and Probate Legal Group.
AREAS WE SERVE: Cook, DuPage, Kane, Lake and Will counties