Dying with a mortgage on your house can be an issue for your heirs. If they want to sell the house, it’s no big deal – the mortgage will be paid out of the sale proceeds. But what if they want to keep the house?
In North Carolina, unless you direct in your will to have the mortgage paid off through the assets of the estate, your beneficiaries will inherit the house subject to the mortgage.
No one is forced to take possession of a house – and mortgage – if they don’t want to. Beneficiaries can disclaim their interests in the inheritance. So, the burden of a mortgage is not automatic just because you left the house to someone in your will.
If your mortgage has a due-on-sale clause, which most do, the Garn-St. Germain Depository Institutions Act of 1982 allows immediate family members to take over the mortgage without triggering the due-on-sale clause. This exception does not apply to non-family beneficiaries, though.
Proper planning can avoid these potential mortgage issues.
First, figure out if any of your potential heirs even want the house. Next, if they do, determine your monthly mortgage/tax/insurance payment and determine whether your potential beneficiary can afford to inherit the house as it is. If not, determine if there is enough money in the estate to pay off the mortgage, or at least reduce it substantially. If all else fails, you may consider purchasing life insurance for the purpose of paying off the mortgage when you pass. A term policy should do the trick.
Sit down with your family and discuss these issues. Then, visit StephensonLaw for an Estate and Wealth Planning Sessions to discuss your options and Leaving a Legacy.
Author Bio
Paul Yokabitus
Founder & Estate Planning Lawyer
Paul Yokabitus is the founder of Cary Estate Planning, where he helps North Carolina families protect what matters most through wills, trusts, probate, and special needs planning. Known for his “planning, not paperwork” approach, Paul turns complex legal concepts into clear, practical strategies so clients feel informed and confident at every step. He has been recognized as a Business North Carolina Legal Elite attorney and a Super Lawyers Rising Star, and was named to the Triangle Business Journal’s 40 Under 40. A graduate of Campbell University School of Law, Paul lives in the Triangle with his wife, Alix, and their two sons.
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Paul and his team at Cary Estate Planning are fully committed to creating a personalized experience to develop thorough and comprehensive estate plans. They value their clients and go above and beyond to make sure that no details are missed. I would highly recommend Paul to anyone looking to create an estate plan.
I was referred to Paul by my Real Estate Attorney and I could not say enough about how exceptional the client service has been from everyone I spoke to. The communication is prompt and I feel like they really took the time to answer all my questions and set things up exactly as I wanted, but also recommended things to make it easier on my family down the line.
After attending one of Paul’s estate planning seminars, my husband and I knew we wanted Paul to assist us with our estate planning. His honest, professional approach to this necessary part of life put us at ease with the process. We will continue to recommend Paul and Cary Estate Planning.
We had a great experience working with Paul Yokabitus and the team at Cary Estate Planning to set up our Will and Estate Plan. The process was clear and easy, and in the age of COVID, our signing session was very well done, easy, and safe.
The Cary Estate Planning team will make sure that you have the information you need to be confident in your estate planning decisions. I learned so much from videos, a one-on-one in-person consultation, the website, emails, and a newsletter mailed the old fashioned way. The fee is very reasonable given the importance of estate planning. No matter the size or number of your assets, don’t procrastinate like I did!
Paul is a masterful attorney. He’s very good at taking your intentions and defining that into a durable Trust and Will. Best of all he is as simple and plain-spoken as you like. Or as fast as intellectual as you may be. It’s all about your your speed and your desired outcomes. Would strongly recommend this firm.
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