Paying the Mortgage on a Deceased Person's Home in Ontario

A death can leave a mortgage in limbo while the family waits for a will to be located and for authority over the estate to be sorted out. How the lender treats the loan depends on the mortgage terms and the facts, so it is worth confirming with a lawyer. Falling behind can put the home, and the estate's value, at risk.

This article explains who is generally in charge of the home, how the mortgage debt is treated, and the practical steps that help avoid default while the estate is administered.

Who is in charge of the home

In Ontario, only an estate trustee has legal authority to manage or distribute an estate, which includes selling the home or clearing it out. A deceased person's property, including the home and its contents, vests in the personal representative, who holds it as trustee.

If the home is in the deceased's name alone, the estate trustee registers a transmission application to deal with title. Until someone has that authority, relatives who move in or start making decisions may be acting without it. Family members who want to help should speak with the named executor or a lawyer first.

How the mortgage debt is treated

When a person dies owning mortgaged land, the land itself is primarily liable for the mortgage debt as between the people claiming through the deceased. A beneficiary who receives the home takes it subject to the mortgage unless the will or another document shows a contrary intention.

A general direction in a will to pay debts out of the estate is not enough by itself to shift the mortgage off the home. The testator must signify that intention expressly or by necessary implication. This differs from the general rule for the deceased's other debts, which the residuary estate pays rateably according to value, subject to a contrary intention in the will and to s. 32 of the Succession Law Reform Act.

What the lender will do, and what its mortgage contract or any creditor insurance says, varies by lender. Read the mortgage documents and ask the lender directly.

Keeping the mortgage out of default

Because lender practice differs, the safest approach is early, documented contact. Only an estate trustee has legal authority to manage the estate, so how to approach the lender before that authority is in place depends on your situation and is worth confirming with a lawyer.

• Locate the mortgage statement and note the payment amount, date and how payments are made.
• Contact the lender promptly, explain that the owner has died, and ask what documents it needs.
• Find out whether payments are made by pre-authorized debit from the deceased's account, and what happens to that account.
• Keep records of every payment and every conversation.
• Ask a lawyer whether estate funds can safely be used for payments, given that the estate's debts are paid in a set way.

If the home is a matrimonial home and a spouse who has no interest in it was living there when the other spouse died, that spouse may stay in possession against the estate, rent free, for sixty days after the death. A matrimonial home is every property in which a person has an interest and that is ordinarily occupied by the person and their spouse as their family residence, or, if the spouses have separated, was occupied that way at separation. For the equalization and matrimonial home parts of the Family Law Act, spouse means people who are married to each other, or who entered a void or voidable marriage in good faith, while unmarried cohabitants are covered only by the wider support definition in s. 29.

Insurance, tax and trustee risks

Fire insurance statutory conditions are part of every fire insurance contract in force in Ontario, including home policies covering fire. A change material to the risk that is within the insured's control and knowledge voids the contract as to the part affected unless promptly notified in writing to the insurer or its agent. A house left vacant after a death can be such a change. Once notified, the insurer may cancel, or may require an additional premium to be paid within fifteen days.

Vacancy limits are policy-specific, so read the wording of the policy and notify the insurer in writing.

Other trustee protections matter as well. A CRA clearance certificate, requested on Form TX19, confirms that income tax, GST/HST, interest and penalties owing up to the date it is issued have been paid or secured. A legal representative who distributes assets without one can be personally liable for unpaid tax, up to the value of the assets distributed. A trustee who advertises for creditors' claims and then distributes is not liable to a creditor whose claim they had no notice of at that time.

A court may relieve a trustee from personal liability for a breach of trust if the trustee acted honestly and reasonably and ought fairly to be excused. Real property the personal representative has not disposed of within three years after death vests in the beneficiaries, unless a caution has been registered, which holds off vesting for another three years.

What to do next

• Confirm who the estate trustee is and whether a certificate of appointment is needed.
• Gather the mortgage statement, the will, and insurance and property tax records.
• Contact the lender and the home insurer in writing.
• Arrange to secure, check and heat the home if it is empty.
• Keep a running record of money paid in and out of the estate.
• Speak with a lawyer or accountant before selling or distributing anything.

Frequently asked questions