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How liable will my heirs be for my mortgage debt?

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How liable will my heirs be for my mortgage debt?

February 15, 2013

Q: Can I leave real estate that has an existing mortgage to my heirs? If so, what options do they have?

A: Yes, you can leave real estate with an existing mortgage. Your heirs would not be personally liable for the mortgage; but if it isn't paid, then the bank could foreclose. The bank could not sue your heirs for any deficiencies on the mortgage since your heirs are not personally responsible.

Most lenders will allow the heirs to continue to make the payments so long as they are current, but technically the lender has the right to accelerate the mortgage whenever there is a transfer of the interest.

In any case, your heirs cannot be hurt by leaving them the real estate, since they would have no personal liability for the debt.  They could either sell it and pay off the mortgage or, if the property isn't worth as much as the mortgage balance, the could simply allow the lender to foreclose.

One thing you could do if you want to protect the property would be to obtain mortgage life insurance, which would pay off the mortgage if you should pass away.

-- Answer from Dave Kennett, an attorney on JustAnswer

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