Who Pays the Mortgage on a Deceased Person's House in Ontario?

When someone dies owning a home with a mortgage, families often ask the same thing at once: do the payments keep going, and who has to make them? The answer depends on how the home was owned, what the mortgage documents say, and whether there is an estate trustee in place.

This article explains in plain language who deals with the mortgage, how the type of ownership changes things, what a lender must do before selling a home, and what your options are if the estate cannot keep up. It is general information, and a lawyer can confirm how it applies to your mortgage.

Who is responsible for the mortgage?

Ontario says an estate trustee is the only person with legal authority to manage or distribute an estate. The estate trustee winds up the deceased's affairs, which includes paying taxes, bills and debts, collecting assets and distributing what is left to those entitled. One of the fundamental duties of an estate trustee is to ascertain and pay the estate's debts and liabilities.

A mortgage is one of those debts, secured against the home. In general, that means the mortgage is dealt with by the estate, not automatically by each child or relative personally. Whether a particular family member is personally on the hook can depend on whether they signed the mortgage, so check the documents. A lawyer can confirm your position.

Until an estate trustee is formally in place, nobody else has clear authority to sell or transfer the home. That is why families often feel stuck in the first weeks. Gather the mortgage statement, the latest property tax and insurance information, and any will, then speak with the lender and a lawyer about timing.

How the home was owned changes the answer

Each co-owner is listed on title as either a joint tenant or a tenant in common, and that registration decides whether the survivor takes the deceased's share. When a joint tenant dies, the share passes to the surviving co-owners. A tenant in common's share does not go to the other owners and becomes part of that person's estate.

Whether a surviving joint owner is also responsible for the mortgage depends on who signed it and what the mortgage documents say, so check them and ask the lender. If the deceased held the home alone or as a tenant in common, the deceased's share is part of the estate, and the estate trustee deals with the estate's debts.

What if payments stop?

Lenders do not simply take a home because someone has died. Ontario policy material says a court-enforced mortgage sale is not triggered simply by the passage of time after death. Where a lender uses power of sale under Part III of the Mortgages Act, the material describes a default of at least 15 days and at least 35 days' notice to interested parties, and everyone with a registered interest must be served with the notice of sale. Because that is a summary, the current statute should be checked.

Missed payments still cost money. Federal law bars charging a higher rate on mortgage arrears than the rate on the principal that is not in arrears. How a lender treats a borrower's death, and how much time it allows the estate, depends on the mortgage terms and the lender's own approach. Ask the lender in writing, and keep a record of what you are told.

• Contact the lender early and explain that the borrower has died.
• Ask what documents the lender needs and who it will deal with.
• Do not ignore notices; a notice of sale has real deadlines.
• Get legal advice before agreeing to anything that changes the loan.

Paying it off: selling, keeping or refinancing

For a taxable estate, Ontario values real estate at its appraised value on the date of death, less encumbrances such as a mortgage or lien. Other debts, such as credit cards and lines of credit, cannot be deducted. This affects Estate Administration Tax, which for certificates applied for on or after January 1, 2020 is $15 for every $1,000 (or part thereof) of estate value over $50,000. Confirm the current rate when you apply.

If the estate trustee sells the home, the mortgage is normally paid from the sale proceeds. A buyer from an estate trustee who has an express or implied power of sale takes the property free of the deceased's debts if the buyer is a bona fide purchaser for value and the required affidavit is supplied. By contrast, property divided in specie to beneficiaries without a court order can stay subject to the debts for three years. That is one reason to settle debts before handing a home to a beneficiary.

A beneficiary who wants to keep the home may be able to pay out the mortgage or refinance it, but a lender will make its own credit decision. A prepayment charge may apply depending on the mortgage terms. Federal law lets a borrower prepay a mortgage whose term exceeds five years from its date after five years, by paying the balance plus three months' interest.

Tax and paperwork to plan for

The Income Tax Act treats a deceased taxpayer as having sold each capital property immediately before death for its fair market value. If the home was the deceased's principal residence, the designation applies only until the date of death, and the legal representative must still designate it on the final return using Schedule 3 and Form T1255, even if the whole gain is exempt. If the estate sells later, the gain is reported on the T3 return, generally as the sale price minus the fair market value reported on the final return, plus disposition costs.

Deadlines matter. For a death from January 1 to October 31, the final return is due by April 30 of the following year, and for a death from November 1 to December 31 it is due six months after death. When land is transferred by an estate trustee, the transfer must include a statement that the transferor is entitled to transfer the land, and it must say whether title is subject to spousal rights under the Family Law Act.

What to do next

• Find out how the home was registered on title and who signed the mortgage.
• Locate the will and identify who can act as estate trustee.
• Call the lender, ask for the payout balance and keep written records.
• Check that insurance and property taxes are being kept up.
• Speak to a lawyer before selling, transferring or refinancing, and an accountant about the final return.

Frequently asked questions