What happens to your loans and debts when you die?

The general rule is that your debt, whether it be a mortgage, private loans, credit card debt or car loans, will need to be paid back. In most cases, the appointed executor of the estate will use the deceased’s assets to see to this.

With unpaid mortgages here’s what you can expect:

Ordinarily, the executor of your will will use your estate to pay off the mortgage.

In the event that there is a substantial amount of money within the estate to pay off the mortgage, the inheritors may elect to keep the property which is mortgaged.
It is also possible for a relative, nominated in the will, to legally inherit and take ownership of the house. In this circumstance, notifying the lender may allow them to assume your mortgage.
It is also possible that a mortgage may be paid out from proceeds of a life insurance policy.

In the event that your estate can’t pay off the mortgage and the inheritors can’t afford it either, the beneficiaries of your will generally opt to sell the property, pay off the debt using the proceeds of the sale and distribute the balance in a way requested in your will.