What Happens to a Mortgage When Someone Dies

Dealing with the loss of a loved one is an overwhelming and emotional experience. Amidst the grief, the surviving family is often faced with a mountain of administrative and financial tasks that can feel impossible to navigate. Of all these financial matters, the mortgage on the family home is often the largest, most complex, and most intimidating.

In this difficult time, urgent questions immediately come to mind: Does the mortgage debt just disappear? Does the bank automatically take the house? Who is responsible for making the payments now?

The uncertainty can be terrifying. This guide is designed to provide a clear, calm, and compassionate explanation of exactly what happens to a mortgage in Ontario when a borrower passes away. We will cover the different scenarios for surviving spouses and heirs, clarify the role of the estate, and explain the critical importance of being prepared to protect your family’s home.

The First Principle: The Debt Remains

The most important thing to understand is that the mortgage debt does not die with the person. The mortgage is a loan that is secured against the property itself. The lender has a legal claim to the property until the debt is paid in full, so the loan must be dealt with as part of the deceased's final affairs.

The Role of the Estate and the Executor

When a person passes away, all of their assets (like property and investments) and liabilities (like a mortgage and credit card debt) are bundled together into what is legally known as their Estate. The person named in the will to manage this is called the Executor.

The Executor’s responsibilities include ensuring that all debts are paid, including the ongoing mortgage payments. These payments should be made from the estate's funds (e.g., from the deceased's bank accounts) to keep the mortgage in good standing while the family determines a long-term plan.

The Importance of Immediate Communication

One of the first and most important calls the Executor or a surviving family member should make is to the mortgage lender. It's crucial to inform them of the death and provide a copy of the death certificate. Lenders deal with these situations regularly and will typically be very supportive and place a hold on any collections activity, provided they are kept informed and see that a clear plan is being put in place to continue the payments.

Learn more about home equity loans in Ontario

Check your eligibility in under 60 secs.

See How Much I Qualify For

Scenario 1: The Property was Jointly Owned

In Ontario, the vast majority of married or common-law couples own their home as "joint tenants with right of survivorship." This legal distinction is incredibly important.

Joint Tenancy with Right of Survivorship

This is the most common form of ownership for spouses. "Right of survivorship" means that when one owner dies, their share of the property automatically and immediately transfers directly to the surviving owner(s).

The immense benefit of this structure is that the home bypasses the estate and the probate process. Probate is the court process to validate a will, which can be lengthy and costly. With joint tenancy, the surviving spouse becomes the sole owner of the property from the moment of their partner’s passing, making the situation much simpler to manage.

The Surviving Spouse's Options

As the new sole owner of the property, the surviving spouse has several options for how to handle the mortgage:

Assuming the Mortgage: In many cases, the surviving spouse can simply "assume" the mortgage and continue making the payments as scheduled. They will need to formally apply with the lender and prove that they can afford the payments on their own, single income. As brokers, we can help facilitate this qualification process with the lender.

Refinancing the Mortgage: This is often a better option. The survivor can apply for a brand new mortgage in their name only. This new loan pays off the old joint mortgage in full. This is an excellent opportunity to get a new, competitive interest rate, choose a term that fits their new financial situation, and potentially access some equity for other needs.

Selling the Property: If the surviving spouse decides they cannot afford the home on their own or wishes to downsize, they have the right to sell the property. From the proceeds of the sale, they would pay off the existing mortgage in full, and the remaining equity is theirs to keep.

The Broker's Role for the Survivor

During an incredibly emotional time, it can be hard to make these major financial decisions. Our role is to provide calm, clear, and objective advice. We can run the numbers for each scenario, help you understand your qualification, and handle all the communication with the lender, taking that administrative burden off your shoulders.

Scenario 2: The Deceased Was the Sole Owner

The situation is more complex if the person who passed away was the only owner on the title to the property, or if it was owned as "tenants in common."

The Home Becomes Part of the Estate

In this case, the home does not automatically transfer to a survivor. It becomes a primary asset of the deceased's estate, and its fate is managed by the Executor according to the instructions in the will. The property will likely have to go through the probate process, which can take several months. During this time, the Executor must continue making the mortgage payments from the estate's funds.

The Heirs' Options

Once the estate is settled, the beneficiaries of the will have a few choices:

Paying Off the Mortgage from the Estate: If the estate has sufficient cash or other liquid assets (like life insurance proceeds or investments), the Executor can use those funds to pay off the mortgage balance in full. The home is then transferred free and clear to the designated heirs.

Selling the Property: The most common option is for the Executor to sell the property. The proceeds from the sale are first used to pay off the mortgage and any other outstanding debts. The remaining equity is then distributed to the heirs as specified in the will.

An Heir Qualifying for a New Mortgage: If an heir (for example, an adult child who inherited the home) wishes to keep the property, they cannot simply take over the old mortgage. They must apply for a brand new mortgage in their own name to "buy" the property from the estate. This new mortgage pays out the deceased's old mortgage.

The Role of Insurance in Protecting Your Family

This is where proactive planning can make all the difference for a surviving family. Having the right insurance in place can remove all the financial stress from the situations described above.

Mortgage Life Insurance (From the Bank)

As we’ve discussed in other articles, this is the optional insurance offered by your lender. If the deceased had this type of policy, the insurance company pays the benefit directly to the bank to clear the mortgage debt. The home is now owned free and clear, which is a good outcome. However, this policy offers no flexibility.

Personal Term Life Insurance (The Better Option)

This is a policy that you own personally. The death benefit is paid as a tax-free lump sum directly to your chosen beneficiary—your spouse or your children. This provides crucial flexibility. Your family receives the cash and can make their own decision. They could pay off the mortgage, but they could also choose to use the funds to cover other living expenses while continuing to make the affordable mortgage payments. This choice is invaluable.

Your Path to Peace of Mind

The death of a homeowner is a tragedy, but it does not have to become a financial crisis for their family. The Canadian financial and legal systems have clear processes in place to handle these situations.

The key to protecting your family is proactive estate planning. This means ensuring your will is up to date, understanding how the title to your home is held (e.g., joint tenancy), and, most importantly, having the right type of life insurance in place. A mortgage is often the largest debt a family has, and ensuring it is protected provides an incredible sense of security.

The best time to plan for this is now. Contact our brokerage today to review your current mortgage structure. We can work with you and refer you to our network of trusted legal and insurance professionals to ensure you have a comprehensive plan that protects your family's future.

Get Personalized Advice

with an Award-Winning Mortgage Broker

4.9 from 812 reviews

Schedule My Call