Is the family responsible to pay the mortgage for a loved one who has passed away?

When a family member dies, who pays for the mortgage?

Thanks for writing in, Louine; your question is something that we hear often from family members who are dealing with a property in an estate after the death of a loved one. Let’s review how properties can be owned, who is responsible for the mortgage payments, and the impacts for the executor of the estate.

When someone dies, the executor (the person who manages the estate’s administration) must create a list of everything the deceased owned and owed at time of death. A list showing the values of both the assets and the liabilities will help the executor determine the value of the estate for probate purposes, advise the beneficiaries of what they are set to inherit, and better understand the estate’s cash flow and what the payment obligations are.  

When someone owns a property, this may come with a mortgage or secured line of credit that is borrowed against the premises. Depending on how the asset is registered and held, Louine, the payment responsibility may fall to different people.

Sole ownership

If the deceased owned a property with a mortgage owing in their name only, then no one else will be responsible to pay back the loan. This does not mean that the outstanding mortgage balance is forgiven; it simply means that family and friends are not personally responsible for the repayment of the liability.

The executor must ensure that the estate continues to make the mortgage payments until the property is sold. As long as there is cash in the bank account, this should be a simple process. However, if the estate is cash strapped, there are other options open to the executor, as outlined in this MoneySense article: “How does an executor pay estate expenses during the probate process?”

Joint ownership with right of survivorship

In Ontario, when spouses (either common-law or married) own a property together as joint owners with right of survivorship, the property rolls over to the surviving spouse when one partner dies. Of course, the mortgage also rolls over to the spouse and the name of the deceased is removed from property title. A lawyer would handle an update such as this, Louine. Note that in this case, the surviving spouse—not the executor—is responsible for the mortgage payments as it falls outside of the estate’s administration.

Tenants in common

A property can also be owned by many individuals in percentage/share form, called tenants in common, in which case ownership does not roll over to the surviving spouse. Some examples could be friends purchasing a cottage together and splitting the ownership evenly, or family members purchasing a rental property. The key here is that each person owns an individual share, and when one of the co-owners dies their share of the property will flow through to their estate. 

Depending on what was previously agreed to, there could be instructions on how to deal with the death of one of the co-owners. In some cases, the remaining owners will opt to purchase the deceased’s share of the property. And if there were any mortgages remaining, the deceased’s portion of the loan would be deducted from the property value of that share. In this case, the executor must ensure the estate pays its share of the mortgage payments until the deceased’s ownership share can be dealt with.

As you see, Louine, there are many ways a person can own a property, and this affects who is responsible for a mortgage after death. The good news is that you can rest assured knowing that the burden of paying the loan does not fall on family and friends who are not named on title, or the loan agreement. 

Debbie Stanley is the CEO and senior estate administrator at ETP Canada, a boutique firm located in Guelph, Ont., specializing in estate administration. ETP Canada helps executors navigate their role with services such as executor support, estate accounting, professional executor services, and most recently launched an online course designed for Canadian executors called Executor Ready. 

Read more on estate planning:

• What are the fees for becoming a joint tenant on a parent’s property?
• What are the taxes on transferring real estate to your kids?
• Capital gains, taxes and more: The implications of inheriting real estate
• Wording a will to cover loans to family can be a hot potato
• Mortgage renewal calculator

About Debbie Stanley, TEP, MTI

Debbie Stanley is an estate and trust professional, and CEO of the estate firm ETP Canada. She is a writer, speaker and regularly featured guest on Zoomer Radio.

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