When a joint tenant dies, the mortgage is typically not affected. The surviving joint tenant or tenants will assume full responsibility for the mortgage payments and ownership of the property.
In most cases, the mortgage will not be affected by the death of one joint tenant. The surviving joint tenant or tenants will become the sole owners of the property and responsible for making the mortgage payments.
However, there are some important considerations to keep in mind, such as estate planning and property ownership rights, which we will discuss in more detail below.
Understanding Joint Tenancy And Mortgage Ownership
Definition Of Joint Tenancy
Joint tenancy is a legal term that refers to a type of shared property ownership. In joint tenancy, two or more individuals, known as co-tenants, own an equal share of a property.
Most importantly, joint tenancy includes the right of survivorship, meaning that if one of the co-tenants dies, the other co-tenants automatically inherit their share of the property.
The Different Ways Of Owning A Property
There are two primary ways of owning a property: joint tenancy and tenancy in common.
Joint tenancy
As discussed above, joint tenancy includes the right of survivorship, and when one co-tenant dies, their share is automatically inherited by the other co-tenants.
Tenancy in common
In a tenancy in common, each co-tenant owns a distinct, separate share of the property, and their shares don’t pass to the surviving co-tenants upon death.
Instead, their shares are inherited by their beneficiaries or heirs according to their will or state laws.
Comparison Of Joint Tenancy And Tenancy In Common
There are several key differences between joint tenancy and tenancy in common, including:
Right of Survivorship
Joint tenancy has the right of survivorship, meaning that the surviving co-tenants automatically inherit the property.
Tenancy in common does not have this right, and each co-tenant share of the property is inherited by their beneficiaries or heirs.
Inheritance
In joint tenancy, the property is inherited by the surviving co-tenants, while in tenancy in common, the property is inherited by the beneficiaries or heirs of the deceased co-tenant.
Ownership shares
In joint tenancy, each co-tenant owns an equal share of the property. In a tenancy in common, each co-tenant can own a different percentage of the property.
Overview Of Mortgage Ownership In Joint Tenancy
When a property has a mortgage and is owned in joint tenancy, each co-tenant is responsible for the mortgage payments.
If one co-tenant dies, the surviving co-tenants are still responsible for the payments, and the mortgage company can’t demand full payment of the loan.
However, the surviving co-tenants might need to refinance the mortgage to remove the deceased co-tenants name from the agreement.
Additionally, if one co-tenant defaults on the mortgage payments, the other co-tenants are still liable for the debt.
What Happens To The Mortgage When One Joint Tenant Dies?
Losing a joint tenant can be a distressing and difficult matter, with legal, financial, and emotional burdens to bear.
One of the biggest concerns relates to the mortgage on the property, especially if the deceased tenant was the primary borrower.
When Is The Mortgage Due?
The passing of a joint tenant can trigger a “due on sale” clause in a mortgage document.
This clause is common in most modern housing loans, allowing lenders to demand full repayment of the outstanding mortgage balance if the property is sold or transferred to a new owner.
However, owing to the specific legal nature of joint tenancy, the surviving joint tenant may have some leeway in avoiding immediate repayment. Here’s what you need to know:
- If the joint tenancy was created before the mortgage, the surviving tenant may have the right to continue making payments on the existing loan. However, this can depend on the terms of the mortgage, state laws, and lender policies.
- If the joint tenancy and mortgage were created simultaneously, the surviving tenant may have to refinance or sell the property to pay off the mortgage.
- If the mortgage is not paid off or refinanced, the lender may initiate foreclosure proceedings, which could result in the loss of the property.
What Options Does The Surviving Joint Tenant Have?
When faced with the passing of a joint tenant, the surviving tenant may have several options to choose from when it comes to handling the mortgage:
Refinancing the mortgage
If the surviving tenant is financially stable and has good credit, they may be able to refinance the mortgage in their own name or with a new co-borrower. This can help them retain ownership of the property and avoid foreclosure.
Selling the property
If the surviving tenant cannot afford to refinance the mortgage, they may consider selling the property. This can help pay off any outstanding debts and provide a fresh start.
Transferring the ownership to another person
The surviving tenant may also be able to transfer partial or full ownership of the property to another person, such as a family member or trusted friend.
This can help ensure the mortgage and other financial obligations are met, while also keeping the property within the family or close circle.
Dealing With Creditors And Liabilities
When one joint tenant dies, both tenants’ assets and liabilities become part of their estate. This can include any outstanding debts, such as mortgages, credit cards, and loans.
Here’s what you need to know about dealing with creditors and liabilities after the death of a joint tenant:
- The surviving tenant may not be liable for any debts solely in the name of the deceased tenant unless they were a joint account holder or co-signer.
- The surviving tenant may be responsible for any shared debts under joint tenancy, including mortgages and other shared debts.
- Creditors may not be able to pursue collection against a joint tenancy property until both tenants have passed away, or until the surviving tenant sells, transfers, or refinances the property.
- Seeking legal counsel can help the surviving tenant understand their rights and responsibilities, as well as help them negotiate with creditors.
FAQs for what happens to a mortgage when a joint tenant dies?
What Happens To A Joint Tenant’S Mortgage When They Die?
If one of the joint tenants dies, their share in the mortgage passes on to the surviving tenant. The surviving tenant is then responsible for the payment of the entire mortgage.
Can A Joint Tenant’S Death Terminate A Mortgage Contract Or Agreement?
No, a joint tenant’s death doesn’t terminate a mortgage contract or agreement. The surviving tenant is still contractually obligated to pay the mortgage and may have to refinance the loan if they can’t continue with the current terms.
Is Probate Necessary When A Joint Tenant Dies?
If the property is owned as joint tenants, probate isn’t necessary, as the property passes on to the surviving tenant. However, probate may be necessary if the property was owned as tenants in common.
How Can Joint Tenants Avoid Mortgage Issues Upon Death?
Joint tenants can avoid mortgage issues upon death by creating an agreement to outline the distribution of the property and payment of the mortgage in the event of a tenant’s death. They may also consider life insurance policies to cover mortgage payments in case of death.
Conclusion
When a joint tenant passes away, the surviving joint tenant often inherits their mortgage responsibility. However, the intricacies can vary depending on your agreement and local laws.
Engage a professional adviser, be prepared and protect your interests – because when life happens, you want your home to be a haven, not a headache.
Reference
https://www.boe.ca.gov/proptaxes/pdf/Ownership_DeedRecording.pdf