In this post, we're going to touch upon unfortunate circumstances: death. The death of a loved one is incredibly hard to go through. We hope that we can, at the very least, make navigating these tragic circumstances a little bit easier. We're going to be discussing what to do if, when your spouse has died, you might be wondering what to do with the mortgage if you're not on the loan.
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Unsure about your options if your spouse isn't on the mortgage? Get expert advice tailored to your unique situation and ensure your peace of mind. We're here to help you navigate the process with clarity and confidence.
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Now we're not real estate attorneys nor are we accounts, but we hope this can point you in the right direction. These are practical opinions. These are the sort of answers customers would get if they called us with these questions. We definitely suggest getting in touch with an attorney when dealing with something like this.
Common Questions Regarding Mortgages When A Spouse Dies
Some common questions regarding mortgages when a spouse dies include:
- Will the bank let us make payments on this mortgage?
- Do we have to refinance?
- Do we have to sell the home?
Are you on the title?
If a spouse dies you'll want to know if you're on the title or not. There's a good chance you're both on the title but you may not be on the loan. This is something you'll want to sort out and accordingly discuss with your attorney.
Ask about the St. Germain Act of 1982
Ask your attorney about the St. Germain Act of 1982. One of the critical provisions of the Act was the preemption of state laws that restricted the enforcement of due-on-sale clauses in mortgage contracts. A due-on-sale clause allows a lender to demand full repayment of a mortgage if the property is sold or transferred. The Act made these clauses enforceable, but with significant exceptions for transfers to relatives, spouse, or children, and for transfers into certain types of trusts. Be sure to check with your lawyer.
Are you in a community property state?
Living in a community property state affects how property is handled if you're not on the title. The nine community property states are:
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
In these states, property is classified as either community property or separate property. This classification impacts how the property is managed and inherited. Whether you reside in one of these states or not, it's essential to discuss your situation with an attorney to understand your rights and obligations.
Do we refinance? Do I put it into my name?
You can if you want. You have rights if you're on the title. You could stay on the current loan or you could qualify for a new mortgage. It's up to you. We suggest speaking with an attorney about how to go about notifying a bank that a spouse who was on the mortgage has passed.
Planning Ahead
Sometimes when doing loans we discuss whether both spouses will be on a loan or not and how things would be handled if a spouse should die. It's a morbid subject but it's one you might want to discuss so make sure that the surviving spouse has rights to the home and loan. Either way, we hope this helps and gives you a good jumping off point.
If you have any questions about this or anything else mortgage related don't hesitate to give us a call at (602) 535-2171.
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Mortgage Brothers LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Mortgage Brothers NMLS 1007154, NMLS #210917 and 1618695. Equal Housing Opportunity.
Transcript of the Mortgage Brothers Podcast
Eddie Knoell and Tom Knoell — Mortgage Brothers Podcast
Overview of the Topic
Today, Eddie and Tom discuss a very difficult situation: the passing of a spouse. If your spouse dies and you're not on the mortgage, what happens? What do you do with the mortgage?
This situation might apply to surviving spouses or even children handling a parent's affairs. Questions arise like:
- Will the bank let you make payments?
- Do you have to refinance?
- Do you need to sell the home?
Important Disclaimer
We're not attorneys or accountants, so this is not legal advice. However, we share practical insights based on what we've learned and heard from customers. Always consult an attorney, especially about the Saint Germain Depository Act of 1982. This law protects surviving spouses by preventing banks from enforcing the “due-on-sale” clause when the spouse is on the property title.
Understanding the Due-On-Sale Clause
Normally, if ownership of a property changes, banks can enforce a “due-on-sale” clause, requiring the mortgage to be paid off or refinanced. But in the case of a surviving spouse, the Saint Germain Act prohibits this, provided the surviving spouse is on the title.
What If You're Not on the Title?
If you're not on the title, things can be more complex. For example:
- If the mortgage existed before marriage, you may not be added to the title.
- In community property states (like California or Texas), laws might protect your rights, even if you're not on the title.
If you're unsure, consult an attorney to clarify your rights.
Options for Surviving Spouses
If you're on the title, you have several options:
- Continue Making Payments: You can simply keep paying the mortgage under your spouse's name.
- Refinance: If you qualify, you can refinance to have the loan in your name, possibly securing better terms.
The key is that the bank's primary concern is getting their payments. They're unlikely to force you to sell or pay off the loan outright.
Planning Ahead
Some borrowers worry about this scenario when they're setting up their loans. If one spouse doesn't work but wants to ensure they have rights, they can be added to the loan even if they don't contribute financially. It's important to feel comfortable with your position, and we're here to answer any questions you have about loan setups.
Key Takeaways for Surviving Spouses
In most cases, as long as you continue making on-time payments, you shouldn't face any issues. The bank wants payments, not ownership of the home. However, if you're unsure, it's always best to consult an attorney. It's rare for banks to force a sale or pay-off from a surviving spouse, but knowing your rights is crucial.
Final Thoughts
We hope this discussion was helpful. If you have questions or need guidance, feel free to reach out through our contact form.
Contact Information
Phone: (602) 535-2171
NMLS: 1007154
Disclaimer: This material is for informational purposes only. Consult your tax, legal, and accounting advisors before taking any action.