A mortgage still has to be paid after someone dies.
When a family member dies, there is a landslide of paperwork that must be completed. Among those items is notifying all places where accounts were held of the person's death. Places where the deceased had accounts with a positive balance will roll those assets into the estate; debt accounts are then subtracted from that estate before money and other items, such as homes, are divided among the living. A mortgage company will expect the balance of the loan to be paid in full; accounts can't be canceled without reconciliation. The specifics of estate law can vary by state and, as with all legal matters, people dealing with debts and the estate of a loved one should contact an attorney to ensure matters are completely, and legally, resolved.
Who Is Responsible for Debt
When a family member dies, it is generally not the responsibility of living family members to pay the deceased's debts if accounts were only in the name of that person. If a person dies and accounts were opened jointly with someone who is still living, such as a parent opening an account with his child, the living account-holder is still responsible for those debts. In the case of a mortgage, the living account-holder would have to continue to pay monthly mortgage payments and can't cancel the account.
How Debts are Paid
Debts of the deceased are repaid from the estate of the deceased, explains attorney Ken LaMance of LegalMatch. Creditors, such as mortgage companies, can try to withhold an estate's value up to the amount owed to them. If the estate does not have the funds to cover the balance of a mortgage, the company can foreclose on the home to pay the debt.
Inheriting a Home
If a home left to an adult child by his deceased parents has a mortgage associated with it, he can choose to keep the property and refinance the loan in his name, while paying off the deceased parents' mortgage. This closes the original mortgage account. The child may also opt to have the mortgage paid out of the estate, also in effect closing the account.
Community Property
In states that recognize community property laws -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin -- a living spouse automatically becomes responsible for all of the deceased's debts even if that person's name is not on the loan, notes Bankrate.com adviser Steve Bucci. A child can't cancel or alter a mortgage account in this instance unless his name is on the original account. In any situation where the name of a living party is on the mortgage, that person automatically takes over the debt.
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