Did you know that no one is required to take possession of a property (and mortgage) unless they want to do so?  Simply leaving a mortgaged property to your heirs does not necessarily subject them to your debts. However, if your heirs want the property, they must either take over the mortgage or pay it off.

A mortgage may have a “due on sale” clause.” Death of the borrower may trigger the due on sale clause and the lender has the right to ask for the balance due if the heirs are not closely related to you.  The Garn-St. Germain Depository Institutions Act of 1982 allows your closely-related heirs to assume the mortgage payments, however.  A lender may allow an heir to refinance the mortgage rather than pay it off as long as the heir can demonstrate his ability to pay.  Take time now to think about your estate plan- are the future beneficiaries of your home able to make the mortgage payments?  There are many options available to help make sure your loved ones can enjoy the gift of your home, such as mortgage protection and term life insurance. Advanced planning now may help to prevent financial concerns later.