Many mortgages have "due upon sale" clauses. This means that in the event of the sale or transfer of the mortgaged home, the lender has the right to foreclose on the property, requiring payment in full. If your spouse dies, you might use his mortgage insurance or life insurance to pay off the loan. However, If neither of these options is available to you, you'll need to take a different path to staying in your home.
Surviving Spouse on the Deed
The Garn-St. Germain Depository Institutions Regulation Act, instituted in 1982, gives mortgage lenders the option to demand full repayment of a mortgage upon the transfer of ownership of the property. However, mortgage lenders cannot enforce due-upon-sale clauses if the surviving spouse is on the deed to the home. In such a case, you will typically have the right to take over the mortgage, make the required payments and continue living in the home.
Lenders cannot use the Garn-St. Germain Depository Institutions Regulation Act to call in a mortgage if a spouse inherits a property. In this case, you can take over the mortgage, even if your name was never on the original deed. In fact, any relative who inherits a home from a deceased mortgage borrower can take over the mortgage on the property. However, the inheriting party must live in the home.
Absence of a Due-Upon-Sale Clause
Though many mortgages have due-upon-sale clauses, not all of them do. Carefully review your spouse's mortgage documents to discover if they agreed to this clause. If the loan terms do not include it, the lender cannot use the clause to foreclose on the home after your spouse's death, even if you are not on the deed and did not inherit the property. However, you will need to keep up with your mortgage payments to avoid defaulting on the mortgage and facing foreclosure.
According to the Chicago Tribune, some lenders employ unscrupulous tactics when a borrower dies. They may attempt to foreclose on a home or coerce payoff, even when a spouse has the right to assume the mortgage. Others might attempt to charge the surviving spouse fees to take over the mortgage. To protect your interests, notify the lender of your intention to take over the mortgage and continue making timely payments. In addition, seek the help of an experienced real estate attorney.
- Chicago Tribune: 6 Situations Where The Lender Can't Call Your Mortgage
- Bankrate: Dealing With Hubby's Mortgage After Death
- Federal Deposit Insurance Corporation: Garn-St. Germain Depository Institutions Regulation Act of 1982
- Cornell University Law School: 12 USC § 1701j–3 - Preemption of Due-on-Sale Prohibitions
- Orlando Sentinel: Know the Answers If Lender Calls the Mortgage Due on Sale
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