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How can a lender collect when a mortgage borrower dies?

On Behalf of | May 28, 2024 | Real Estate

Lenders expect that when they approve a mortgage, they will receive repayment of the loan along with interest and any fees attached to it. Otherwise, the lender can foreclose on a property if the mortgage borrower fails to make payments. However, in some situations a borrower will die before payment of the mortgage is complete.

A lender in this situation still has ways to pursue payment in spite of the death of the borrower, with the exact options depending on the circumstances.


Sometimes more than one person is on the mortgage, as a co-signer or a co-borrower. If this is the case, the lender may insist that the remaining party to the mortgage continue to make payments. If the surviving party does not do so, foreclosure may be an option.

Mortgage insurance

Some borrowers take out a special kind of insurance known as mortgage protection insurance or mortgage life insurance. In the event the borrower dies, the policy will supply payments for the remaining mortgage amount, making it unnecessary to pursue payment from another party.

Heirs and beneficiaries

If the borrower has made out a will passing ownership of the home to a designated heir, you may receive payments from the beneficiary. Alternatively, the borrower may have made someone a co-owner through a joint tenancy arrangement, in which case the surviving owner will become responsible for the mortgage.

It is also possible that multiple heirs will share ownership of the home. In this case, the new co-owners must decide whether to take up the mortgage or sell the residence. It is also possible one of the heirs will assume ownership and the mortgage.

Estate actions

If there is no will or designated new owner, the home will go into the estate of the deceased borrower. The executor should take up the mortgage payments, but if the estate lacks the assets to keep up the mortgage, the lender may consider pursuing a sale on the home to recoup the loan.

Collecting on a mortgage made by a deceased borrower can be relatively simple or complex depending on the circumstances. Nonetheless, lenders may pursue different options to recoup their investment.