Losing a loved one is emotionally exhausting, and unfortunately, the administrative burden that follows often starts before you’ve had a chance to catch your breath. One of the first sources of anxiety for executors and heirs revolves around the family home. specifically the mortgage attached to it.
Does the bank take the house? Do you have to write a check for the full balance immediately? Who pays the monthly bill while the courts are sorting everything out?
These are the questions we hear constantly. The good news is that the process is more protected than most people realize. While the debt doesn’t disappear, you have rights and options that prevent immediate foreclosure in most cases. Let’s walk through exactly how to handle a mortgage during probate, step by step.
Does the Mortgage Die with the Homeowner?
The short answer is no. When a homeowner passes away, their debts do not die with them. However—and this is the part that causes the most confusion—heirs are generally not personally liable for that debt unless they co-signed the loan.
A mortgage is what we call a “secured debt.” It is attached to the physical property, not just the person who signed the papers. This means the house acts as collateral. If the payments stop, the lender still has the right to foreclose on the property to recover their money, regardless of who is living there or who passed away.
The most critical advice we can give immediately is this: Do not stop making payments.
While you are waiting for the probate court to appoint an executor or administrator, the mortgage computer at the bank doesn’t know (or care) that the borrower has died. It only knows if a payment is missed. If there is money available, keeping the loan current is the best way to buy yourself time to make longer-term decisions.
How Mortgages Are Handled in the Probate Process
Once the initial shock passes, you have to look at the estate like a balance sheet. The house is an asset, but the mortgage is a liability that reduces the value of that asset. As the Executor or Administrator, your job is to manage this balance.
The first administrative step is notifying the lender. Many people hesitate to do this because they fear the bank will “call the loan” (demand full payment) immediately. We will explain in a moment why they usually can’t do that, but you must get the communication started. You will need to send a copy of the death certificate to the lender’s specialized department, often called the “Deceased Account” or “Survivor Support” department.
Once you notify them, your goal is to establish yourself as the Successor in Interest.
This is a specific legal designation that allows the lender to talk to you. Before this status is set, privacy laws prevent the bank from giving you loan balances, payment amounts, or payoff quotes. Becoming a Successor in Interest allows you to receive information and statements without forcing you to personally take on the legal liability of the mortgage.
From there, you need to determine the equity. You’ll take the current market value of the home and subtract the remaining mortgage balance. This number helps you decide if the estate should sell the home to pay off other debts or if there is enough value to transfer the property to the heirs.
Who Pays the Mortgage While Probate is Ongoing?
This is where family disputes often happen. If the probate process takes six months (or longer), who is writing the check every month?
Legally, the primary responsibility falls to The Estate.
If the deceased person left behind liquid assets—like a checking account, savings, or brokerage account—the executor should use those funds to keep the mortgage current. These payments are considered administrative expenses necessary to preserve the estate’s assets.
However, we often see “cash-poor” estates. This happens when a person had a valuable home but very little cash in the bank. In this scenario, the estate cannot pay the mortgage.
If the heirs intend to keep the home, they may need to voluntarily chip in to pay the mortgage while probate is pending. If the heirs plan to sell the home, they still might need to contribute to keep the house out of foreclosure until the sale closes.
It is vital to understand that probate does not automatically pause foreclosure. Unlike bankruptcy, which puts an “automatic stay” on creditor actions, a lender can legally file for foreclosure during probate if payments are missed.
The Due-on-Sale Clause and Federal Protections
You might have heard of a “Due-on-Sale” clause. In a standard real estate transaction, this clause says that if the property acts as collateral and the ownership changes hands, the bank has the right to demand the full loan balance immediately.
Technically, death is a transfer of ownership. For decades, this terrified heirs who thought they had to pay off the house instantly.
Fortunately, the federal government stepped in with the Garn-St Germain Depository Institutions Act of 1982.
This act creates a powerful shield for relatives. It prohibits lenders from enforcing the Due-on-Sale clause in specific situations involving death. Generally, if the property is a residential home (less than five units) and the transfer is to a relative, the bank cannot force a payoff.
- Spouses: A surviving spouse can usually take over the loan.
- Children: A child inheriting the home from a parent is protected.
- Relatives: Other relatives inheriting a principal residence are often covered.
This means that in most cases, you can keep the existing mortgage in place. You do not have to apply for a new loan; you just keep making the payments on the existing one.
Three Options for Heirs Inheriting a Mortgaged Home
Once probate settles and the title transfers to the beneficiaries, you generally have three paths forward.
- Option 1: Assume the Loan Thanks to the protections mentioned above, heirs can often “assume” the mortgage. This is incredibly valuable in the current economic climate. If your parent locked in a 3% interest rate years ago, and current rates are significantly higher as of 2026, keeping that old loan can save you thousands of dollars a year. You take over the payments exactly as they are.
- Option 2: Refinance Sometimes assumption isn’t the right fit. If three siblings inherit a house and one wants to keep it, that sibling usually has to buy out the other two. Since the original mortgage doesn’t provide extra cash to pay off the siblings, the heir keeping the house will likely need to get a new loan (refinance) to pay off the old mortgage and generate cash to pay the siblings their share.
- Option 3: Sell the Property This is the most common route when heirs live out of state or simply want the cash inheritance. The executor can sell the property during probate (with court permission) or the heirs can sell it after the title is transferred. The proceeds from the sale are used to pay off the mortgage balance and closing costs, and the remaining profit is split among the beneficiaries.
Special Case: What If It’s a Reverse Mortgage?
If the deceased had a Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, the rules are completely different. You need to pay close attention here because the timeline is much tighter.
A reverse mortgage becomes “Due and Payable” immediately upon the death of the last surviving borrower.
There are no monthly payments to make, but the loan balance must be settled. Lenders typically send a letter quickly asking for the heirs’ plan. You usually have 30 days to respond and up to 6 months to settle the debt (by selling or refinancing). You can often request two 3-month extensions if you can prove you are actively trying to sell the house, giving you up to 12 months total.
The 95% Rule If the balance of the reverse mortgage has grown so high that it is more than the house is worth, heirs have a safety net. You can settle the debt by paying 95% of the current appraised value of the home. This allows you to keep the home even if it’s “underwater,” though selling it is usually the more practical option in that scenario.
Because reverse mortgages are “non-recourse” loans, the estate and heirs will never owe more than the home can sell for. If the house sells for less than the loan balance, FHA insurance covers the difference.
What Happens When the Estate Can’t Pay?
Sometimes, we encounter an “insolvent estate.” This means the debts are higher than the assets.
If the home is worth less than the mortgage balance (underwater), and there is no other money in the estate, the situation can feel dire. However, the hierarchy of debt helps you here.
Secured debts (like the mortgage) get priority payment from the sale of the collateral (the house). If the house is sold and the money isn’t enough to cover the mortgage, the lender takes all the proceeds.
The crucial takeaway is that the deficiency (the remaining debt) generally does not pass to the heirs. You are not required to pay your own money to cover a parent’s bad investment. In most cases, the lender will simply foreclose or accept a “deed in lieu of foreclosure,” and the debt ends there.
Timeline: Steps for Executors Dealing with a Mortgage
If you are looking for a checklist to keep you organized, here is how the mortgage workflow typically looks during probate.
- Month 1: Immediate Action
- Locate the loan statements and find the account number.
- Notify the lender of the death and send the death certificate.
- Keep the utilities on and ensure homeowners insurance is paid (vacant homes need specific insurance policies).
- Make the mortgage payment if estate funds are available.
- Months 2–3: Assessment
- Order an appraisal to determine the home’s market value.
- Calculate the equity (Value – Mortgage Balance).
- Achieve “Successor in Interest” status with the bank.
- Heirs should decide: Keep it or sell it?
- Months 4–6: Resolution
- If selling: Hire a real estate agent experienced with selling property in probate. Petition the court for permission to sell if required by your state.
- If keeping: Begin the process of transferring the title to the heirs.
- If refinancing: The heir keeping the home should begin the loan application process.
- Closing
- The mortgage is either paid off in full at the closing table (sale/refinance) or formally assumed by the heir.
FAQ: Mortgages and Inheritance
Can the bank foreclose on a house while it is in probate?
Yes, they can. Probate does not provide an automatic shield against foreclosure. If payments are missed for several months (usually 90-120 days), the lender can initiate foreclosure proceedings even if the estate administration is still ongoing.
Do I have to qualify for the mortgage if I inherit the house?
Generally, no. Under the Garn-St Germain Act, if you are a relative inheriting a principal residence, you can assume the mortgage payments without having to prove your income or credit score. However, if you want to refinance the loan to get a new rate or take out cash, you would need to qualify for that new loan.
Does mortgage interest stop accumulating during probate?
No, the interest meter keeps running every single day. The longer the probate process takes, the more interest accrues, which slowly lowers the equity available to the heirs. This is why executors often try to sell or transfer the home as quickly as the courts allow.
What happens if the mortgage is higher than the house value?
If the house is “underwater,” the estate can sell the home and give the proceeds to the lender. The lender typically absorbs the loss (unless it is a rare recourse loan with a wealthy estate). Heirs are not personally responsible for paying the difference between the home value and the loan amount.
Can I sell a house before probate is finished?
Yes, but you usually need court permission. The executor can list the home and accept an offer, but the sale generally cannot close until the probate court grants an order approving the sale. This ensures the sale is fair and the proceeds are properly managed to pay off estate debts.
