Experian reports that 44% of Americans have a mortgage, and only 38% of owner-occupied homes are owned free and clear. If someone lives in the Western region of the country they are even more likely to have a mortgage.
Many people mistakenly think most senior citizens have paid off their home loans. In fact, 44% of people 65+ and 27% of people who are 80+ have mortgage debt. The average mortgage debt for someone over the age of 65 is approximately $89,000. All of these numbers are dramatically higher compared to 30 years old.
That means a fair number of people have mortgage debt when they die, and that number is trending upward. Advance funeral planning is more important when you have mortgage debt because that debt doesn’t magically go away when the mortgagee passes.
Common Outcomes When the Deceased Has a Mortgage
Outcome #1 – There’s a Co-Signer on the Loan
If there’s a co-signer on the loan, then they must assume responsibility for the mortgage debt after the other borrower dies.
Outcome #2 – The Estate Pays Off the Loan
If the deceased had cash or other assets those are used to pay off debts before anything is given to benefactors. There’s a good reason why almost everyone can benefit from having life insurance. It can cover the cost of outstanding debts, like a mortgage loan.
Outcome #3 – Benefactor Inherits and Pays Off the Loan
You may find that the estate doesn’t have enough to pay off the full loan amount or any of the remaining loan. In that case, the benefactor will typically need to pay off the remainder of the debt when the mortgaged property is transferred to their name.
Outcome #4 – Benefactor Assumes the Loan
There is a possibility for the benefactor to assume the loan, so long as they meet the lender’s qualifications. First, the loan servicer should be contacted by the heir to let them know about the change in ownership. You’ll also need to produce documents that prove the inheritance. From there the servicer will start the loan assumption process.
In order for this option to be available, typically you need to keep making mortgage payments regularly after the death so that the mortgage is in good standing. Payments on the mortgage can be made before the benefactor legally owns the property. Of course, once the benefactor takes over the mortgage they can then decide to sell the property and use the proceeds to pay off the loan.
Outcome #5 – No Payments Are Made and the Home Goes Into Foreclosure
If the estate doesn’t pay off the loan and a benefactor can’t or doesn’t have the desire to take over the mortgage then the loan service will issue a foreclosure on the home. Exactly how this process will transpire differs from state to state, but usually the service must first issue a lien against the property before foreclosure can commence.
No matter what you’re dealing with after the death of a loved one, Green Cremation Texas can make the entire cremation process easier from start to finish. Call, text or email us today to learn more about our green cremation services and advance funeral planning.