Who pays the mortgage if the owner diesbefore the loan expires? Unfortunately, it may happen that the person who has taken out a mortgage loan suddenly passes away, before being able to completely pay off his debt with the credit institution. Contrary to what one might believe, the mortgage is not automatically repaid upon the owner’s death, but rather transferred to his heirs. But how does this process happen?
Generally speaking, all the subjects involved in the succession are required to take joint responsibility for the payment of the remaining installments of the loan. However, there may be exceptions, such as in the presence of a life insurance policy or heirs who decide to immediately provide for therepayment of the loan. It is also important to know that, once the mortgage has been inherited, the new owners can take advantage of all the options available for classic loans, such as subrogation or replacement. For this reason, it is useful to use tools for find the best mortgage for your needs.
Who pays the deceased’s mortgage
As mentioned at the beginning, it can happen that the holder of a mortgage passes away before having paid all the loan installments. But who pays the mortgage in the event of death, who are the subjects who will have to commit to paying the loan residual debt at the bank?
Generally speaking, upon the death of the mortgage holder, succession proceeds: in other words, the loan is transferred to the heirs. This is because, as foreseen by thearticle 1813 of the Civil Codethe loan contract provides that the party who lent the money – in this case, the bank – always has the right to its repayment, in the same type and quantity.
In reality, a lot depends on the agreements made between the missing owner and the credit institution, so much so that at least four different scenarios arise.
Death of the owner and life insurance
The first and simplest scenario, for managing the mortgage after the owner’s death, is to verify the existence of a possible life insurance policy. If the previous owner had in fact decided to equip himself with one insurance coveragethe heirs will not have to pay for the missing installments of the loan.
In fact, upon the owner’s death, the insurance will pay off the debt to the credit institution, then returning the property to the heirs no longer burdened by the same mortgage. As is easy to imagine, this is the quickest and most painless solution and it is precisely for this reason that, when taking out a mortgage, the banks themselves always recommend having contextual insurance.
Early repayment of the mortgage
If there is no life insurance policy, the heirs must pay the remaining installments towards the bank. However, since all heirs must participate jointly in the payment of the same installments, managing payments could be difficult.
A good solution, if the heirs already have the necessary sum available, is to proceed with:
- L’early repayment of the mortgageespecially if there is little time left until the deadline, so as to pay off the remaining debt in a single payment;
- there division through succession of the property no longer encumbered by the mortgage.
Mortgage in succession with the assumption by the heirs
If the heirs are not able to take advantage of the early repayment of the loan, the only possibility is to proceed with the succession of the same mortgage. In other words, the burden of paying the installments will bear jointly and severally on all the heirs, according to the procedure established by thearticle 1273 of the Civil Code.
However, if you opt for this path, it is useful to know that:
- it is necessary that there is theagreement of all heirs;
- the heirs engage in ajoint and several obligation with respect to the bank, therefore they are all required to pay the mortgage installments regardless of their ownership share in the property.
Regarding the second specification, it is essential to reiterate that the credit institution will not divide the installments between the individual heirs based on their shares, since the latter only apply to internal relationships between them. Usually an heir is appointed who undertakes to pay the installments to the credit institution: it will then be up to this person to collect the relevant portions from the other heirs and to act, even legally, if they do not keep faith with their promises. obligations.
Naturally, the agreement between the heirs must be witnessed by a written documentin this case theI take over, which can be carried out by the notary at the same time as the change of ownership of the property. The deed testifies to the will of the heirs themselves to take over the existing loan.
But what happens if an heir does not want to take on the remaining mortgage payments? The only alternative is the renounces the inheritanceas required by thearticle 519 of the Civil Code. However, you need to know that it is not possible to renounce only a portion of it – such as, in fact, the property on which the mortgage loan is encumbered – but rather the inheritance in its entirety.
Who pays a joint mortgage upon the death of a spouse?
In the previous paragraphs we have analyzed the main cases of management of a mortgage by the heirs, upon the owner’s death. But what happens for joint mortgages? Is the burden of paying the installments only on the living co-owner or also on the other heirs?
As a rule, when one of the joint holders passes away:
- the responsibility for paying the remaining mortgage installments falls on theliving owner;
- the other heirs could decide to take on the debtalways with the assumption procedure provided for by article 1273 of the Civil Code.
Who pays the mortgage in the event of death: additional information
In addition to the legal provisions, there is additional information that can be useful to those who pay the deceased’s mortgage, both in managing the loan itself and for any modification thereof.
Can the deceased’s mortgage be modified with subrogation or replacement?
After the heirs have taken on the deceased’s mortgage, they can certainly arrange for the loan to be modified. There are essentially two options available:
- there subrogation of the mortgage, or the portability of the same to a credit institution that offers better conditions. For this purpose, it is useful to use online tools to find the best substitute for your needs.
- there mortgage replacementor the closing of an existing mortgage with the bank, for the opening of a new one with another credit institution.
Subrogation is the ideal solution for those who do not want to change the amount disbursed of the mortgage, as it does not involve costs for the customer. However, it is not particularly convenient if there are only a few installments left before closing the mortgage and, again, many banks do not grant it for residual amounts of less than 50,000 euros. Replacement, which instead involves the same costs as a new mortgage, is necessary when you also want to change the value of the same mortgage.
Suspension of the mortgage in the event of death
Heirs can apply for mortgage suspension in the event of the death of its original owner? The suspension of the mortgage is a possibility provided for those who find themselves in conditions of economic difficulty: through the institution of Solidarity Fund of Mortgages, also known as Fondo Gasparini, you can ask to stop paying installments for up to a maximum of 18 months.
The heirs of the mortgage can also access the suspension of the mortgage, provided that:
- the financing concerns themain residence;
- there are i requirements provided for by law, such as the death of the borrower, the transfer of an employment contract, the recognition of a disability of no less than 80%.
Sale of the house to pay off the deceased’s mortgage
Finally, if the heirs did not intend to take charge of the deceased’s mortgage – or, again, there was no agreement between them – the solution of sale of the property. By making the house available on the real estate market, and finding a potential buyer, it will be possible to:
- pays off the existing mortgage loanwith the sum obtained from the sale itself;
- divide any remaining money among the heirs.
Naturally, selling the property could be a long process, depending on the conditions of both the property itself and the market trend. For this reason, to manage both the bureaucratic needs and the relationships between the heirs, it is always useful to take advantage of the advice of your accountant and your trusted lawyer.
