What Happens to a Mortgage When the Owner Dies in Manitoba?

If you live in a home with a mortgage and an owner has died, your first questions are probably practical. Can the lender take the house? Who makes the next payment? What if the home was in both names?

The answers depend heavily on the mortgage contract, how the home was owned and what insurance exists. This article explains the general Manitoba framework and the steps to take, and a lawyer can confirm how it applies to your documents.

This article covers the law of Manitoba.

The mortgage does not disappear

A mortgage is a debt secured against the home. Estate assets must cover debts before will beneficiaries inherit, so a mortgage is dealt with before the house is handed to the person who is to receive it.

Mortgagees and unpaid vendors keep their remedies against the land, even where the executor has used the creditor notice process under The Trustee Act. In plain terms, the lender's security on the home is not wiped out by the death.

What the lender can demand, and when, is set by your mortgage contract. Read it, and contact the lender after you have spoken to the executor or a lawyer.

How ownership changes the picture

If some of the deceased's children are not also children of the surviving spouse or common-law partner, the survivor takes the greater of $50,000 or one-half of the estate, plus one-half of any remainder. A common-law partner has the same share as a spouse, but the Act defines that term and separation can change the result.

Spouses, partners and the family home

The accounting and equalization rules under The Family Property Act on the death of a spouse apply to married spouses and equally to common-law partners. A survivor who gets no intestate share because of separation may still apply for an accounting and equalization if property matters were not already settled, and may also have rights under The Homesteads Act. Only the survivor can make that application, and the limitation period is six months from the grant of probate or letters of administration. The court can extend it in listed circumstances.

The survivor may choose between the will gift and the equalization claim. The equalization payment is a debt of the deceased, payable after other liabilities and ahead of will gifts. Because deadlines are short, get advice early.

What the executor must do

The executor or administrator should gather the mortgage documents, learn the balance and keep the home insured and secure. Do not distribute the estate, including the house, until debts and taxes are addressed. The CRA says distributing without a clearance certificate while tax is owing can make the representative personally liable up to the value of assets distributed.

The representative must also serve a surviving spouse or partner with the prescribed notice within one month after the grant, and must not distribute until the survivor consents in writing, the time to apply has expired or an application is decided. Distributing contrary to this makes the representative personally liable.

Mortgage insurance, such as a policy tied to the loan, may pay some or all of the balance. Whether it exists, and what it covers, depends on the policy, so check your papers and ask the lender or insurer.

What to do next

• Find the mortgage, the title or ownership documents, and any insurance policies.
• Confirm how the home was owned: jointly or in one name.
• Find out whether a will exists and who the executor is.
• Order death certificates from Manitoba Vital Statistics, at $30.00 each.
• Keep paying the mortgage if you can, and speak with the lender about your situation.
• Get legal advice before selling, transferring or refinancing the home, or if a spouse's claim may be involved.

If there is no one able to act as executor, the court may appoint the Public Guardian and Trustee as administrator, as a last resort.

Frequently asked questions