What Happens to your Mortgage when you die? Here’s the truth.
I’ll never forget my first call like this.
I was working in the call centre at a major Canadian mortgage lender when the phone rang:
“Hi, I’m calling to let you know my mom passed away. She has a mortgage with you… I want to know what happens next.”
It stopped me in my tracks.
Death and mortgages isn’t something most people talk about, until they have to.
If you're wondering what actually happens when someone dies and there’s still a mortgage on the home, here’s what you need to know. It’s sad. It’s practical. And it’s something every homeowner should understand.
No - The Mortgage Doesn’t Disappear
Let’s get this one out of the way: the mortgage doesn’t vanish when you die.
The word “mortgage” actually comes from old French:
mort = death
gage = pledge or bet
It literally means “a death pledge.”
But despite the name, the debt doesn’t die with you.
It still needs to be paid.
Step 1: The Lender Gets Notified
The first thing a mortgage lender needs is a death certificate. Once they receive that, they’ll change the name on the mortgage to something like:
“The Estate of John Smith” or, if there’s more than one borrower with the other still alive “Alice Smith & The Estate of John Smith”
The estate (usually represented by the executor) is now legally responsible for making the mortgage payments, even before probate is finalized.
I also know that sometimes the copy of the will is requested (if available), so we can confirm whom we can discuss the mortgage details with as the executor of the estate. Another option is the certificate of appointment of Estate Trustee, which would effectively work the same way in confirming to the lender who we can disclose information pertaining to the loan to.
As long as those payments are made though, the lender generally won’t interfere.
If there are more than one borrower and the other is still alive, the executor as well as the living borrower can discuss the mortgage.
Step 2: The Mortgage Keeps Going (for Now)
Once it’s in the estate’s name, there’s no rush to sell the property immediately.
As long as payments are made on time, the mortgage can continue under the estate for a period of time.
This gives the family or executor some breathing room to decide what comes next.
Step 3: Eventually, the Mortgage Must Be Paid Out
Here’s how that typically happens:
Refinancing – A beneficiary or family member may refinance the mortgage into their own name and out of the estate’s name. This also counts under covenant changes, which essentially means no additional funds required, but changing the names on the title/mortgage.
For example: if John on mortgage passes away, Alice can try a covenant change to remove “the Estate of John” on title and qualify on her own
Second example: If John on mortgage passes away, Alice can try to replace “Estate of John” with their son, Alex to help with qualification - so instead of Alice & Estate of John Smith, it would be changed to Alice and Alex Smith
Assumption – A buyer may try to take over the existing mortgage (though lenders rarely approve this). Usually assumptions are at arms’ length, meaning no close family assuming the mortgage (otherwise that would be a covenant change). Lenders don’t really like assumptions, feel free to read up why here!
Insurance Payout – If the deceased had mortgage life insurance, it may pay off all or part of the loan.
Sale of the Property – Most commonly, the home is sold and the mortgage is paid out from the proceeds.
So, to summarize - the mortgage can’t stay in perpetuity in the name of the estate - but lenders are (usually) sensitive the how long these processes can take, and are understanding as long as the mortgage doesn’t fall into default.
There’s one case where a wrench is thrown into things, though…
Meeting with a lawyer and with your mortgage broker can help prepare for plans with the property after the death of a loved one. Lawyers can inform you of the will (or lack thereof), and next steps. Mortgage brokers can discuss options available to the loved ones of the deceased, and what recommendations are to move forward - whether to sell or to qualify without the deceased.
What Happens if the Mortgage Hits Renewal?
Here’s the curveball most people don’t expect:
If the mortgage reaches maturity (renewal time) after the borrower has died, it cannot be renewed like normal.
Everything comes to screeching halt.
Once the lender has a record of death, the original borrower can no longer qualify, because they’re no longer alive.
That means:
The mortgage must be refinanced in someone else’s name, or
The lender must grant a temporary extension (some will do this, especially if the estate is in process), or
The property may need to be sold if no financing options are available.
What If There’s No Will or No Executor Yet?
If no executor has been legally appointed, things get more complicated, but not impossible.
In most cases, as long as the mortgage is being paid, the lender will allow the estate time to get organized.
They’re not racing to foreclose. But they will want a plan in place eventually.
Bottom Line: It’s a Sad but Important Conversation
When a homeowner dies, the mortgage doesn’t just go away, and neither does the responsibility.
Executors and family members are often overwhelmed with grief, legal steps, and paperwork. The last thing they need is confusion around the mortgage.
So here’s the truth:
The mortgage stays alive (unfortunately - unless an insurance policy paid it out)
The estate makes the payments
It must eventually be paid out - through sale, refinance, covenant change. It can’t stay in the name of the estate
And if it reaches maturity, it needs to be refinanced or resolved - lest risking foreclosure
Need Help Navigating It All?
We’ve helped many families understand their options when dealing with property after death. Whether you’re planning ahead or managing a loved one’s estate, we’re here to help. Clearly, patiently, with compassion and without pressure.
Book a call here to get guidance on your next steps.