What Happens to a Mortgage When the Homeowner Dies in Ontario

If a parent, spouse or relative has died and left a home with a mortgage on it, the first worry is usually practical: who keeps making the payments, and can you stay in the house? The answers depend on who owned the home, how it was owned, and what the mortgage contract says.

This article explains how a mortgage fits into an Ontario estate, who ends up responsible for it, and the usual options for keeping or selling the home. It is general information, not advice on your particular mortgage.

Who deals with the home after a death

When a person dies in Ontario, their property passes to their estate trustee, who holds it for the people legally entitled to it, after the deceased's debts are paid. The estate trustee is the only person with legal authority to manage or distribute the estate. Other relatives, even those living in the home, do not gain that authority just because they are family.

Probate is usually needed if the deceased owned real property, although it depends on the type of asset. That means a house owned in the deceased's sole name will often require a Certificate of Appointment before it can be sold or transferred. How the home was owned matters, so check the title before assuming anything.

Who is responsible for the mortgage

Unless the will says otherwise, a deceased person's debts and funeral and testamentary expenses are paid out of the residuary estate, shared rateably according to the value of each part. Mortgaged property is treated differently. If the deceased did not show a contrary intention, the mortgaged property is primarily liable for the mortgage debt as between the people claiming through the deceased. In plain words, whoever inherits the home generally takes it subject to the mortgage.

A will can change this. A will might, for example, direct that the mortgage be paid from other estate money. If you are a beneficiary, read the will's wording on debts and ask a lawyer if it is unclear.

If you were the deceased's spouse, the Family Law Act does not make you liable for your spouse's debts apart from debts you signed for yourself, such as joint debts or guarantees. The one other exception is that during cohabitation, a spouse can make both spouses jointly and severally liable to a third party for necessities of life, unless the other spouse has notified the third party that this authority is withdrawn. If you co-signed the mortgage, that is a debt you signed for, so check the documents.

Can the lender demand repayment?

Whether a lender can require the loan to be repaid after a death, and how it treats an heir who wants to keep the home, depends on the mortgage contract and the lender's own practices. It is not something that can be answered the same way for every mortgage.

In practice, the estate trustee should contact the lender early, provide proof of death and the authority to act, and ask in writing what the lender requires. Keep the payments current if the estate has the money to do so. Missing payments can create problems that are harder to fix later.

Your main options

Whichever route you choose, the estate trustee must act within their authority. Heirs should not sign sale agreements or move mortgage accounts into their own names without confirming that the paperwork is in order.

Living in the home and special situations

• A spouse with no ownership interest who was living in the matrimonial home when the other spouse died may stay rent-free, as against the estate, for 60 days after the death.
• If a spouse owned an interest in the matrimonial home as a joint tenant with someone other than their spouse, the joint tenancy is treated as severed immediately before death, so the deceased's share goes to the estate rather than the co-owner.
• For Estate Administration Tax, a mortgage or lien on real property can be deducted from that property's value, but credit card debt, lines of credit and funeral costs cannot be deducted.

What to do next

• Find the will, the mortgage statements and the property title.
• Confirm who the estate trustee is and whether probate is needed.
• Contact the lender, in writing, and ask about its requirements after a death.
• Check home insurance and property tax payments so they do not lapse.
• Talk to a lawyer before selling, refinancing, or moving into the home if there are several heirs or the estate is short of money.

Frequently asked questions