- Unless the will or another document says otherwise, a mortgaged property is primarily liable for its own mortgage debt between the people inheriting through the deceased.
- A general direction in a will to pay debts does not move the mortgage onto other assets, but an express reference to the mortgage can.
- Alberta's Law of Property Act generally limits a lender to the land and protects an individual who takes over a mortgaged home from a personal suit, with exceptions.
A parent or spouse has died, and the house they owned still has a mortgage on it. You may be wondering whether the mortgage is paid from the rest of the estate, whether the person who inherits the house has to carry it, and whether anyone can come after you personally.
The answers depend on the wording of the will, the type of mortgage, how the house was owned, and who the lender is. This article walks through the general Alberta rules so you know what to ask and when to speak with a lawyer.
This article covers the law of Alberta.
The starting rule: the house carries its own mortgage
Under Alberta's Estate Administration Act, unless the will or another document shows otherwise, a mortgaged property interest is primarily liable for its own mortgage debt as between the people claiming through the deceased. Each part of the property bears its proportionate share.
In plain terms, if the house is left to one person, that person generally receives it together with the mortgage, rather than the mortgage being paid out of the cash and investments left to others. This rule is about who bears the cost among the people inheriting. It is separate from what the lender can do.
What a will can change
A general direction in a will to pay debts does not shift the mortgage to other assets. An express reference to the mortgage in a will or other document is a contrary intention, so a will can direct that the mortgage be paid from other assets.
- A line saying only that debts are to be paid from the estate generally leaves the mortgage with the house.
- A clause that names the mortgage and says it is to be paid from other estate assets can change the result.
- If the wording is unclear, the interpretation can affect what each beneficiary actually receives, so it is worth having a lawyer review it.
What the lender can still do
The default rule between beneficiaries does not, by itself, stop a lender from pursuing other estate property. However, Alberta's Law of Property Act generally restricts a mortgagee's right to the land the mortgage relates to, plus foreclosure, with exceptions covered below. The Act's rule that valid money claims share proportionately when assets fall short also preserves existing mortgages, so secured creditors keep their security.
The personal representative has a duty to satisfy the estate's debts and obligations, and must act with the care, diligence and skill of a person of ordinary prudence. That is why a representative will usually want clear information about the mortgage balance and the lender's position before distributing anything.
Limits on lenders and protection for people taking over the home
Alberta's Law of Property Act restricts a mortgagee's right to the land the mortgage relates to, plus foreclosure. No action lies on a covenant for payment in the mortgage, and waivers are void as against public policy. A person who takes over a mortgaged home is also generally protected: no action may be brought against an individual who is a transferee of land subject to a mortgage.
These protections have exceptions. They are not a safe assumption in every case:
| Situation | What the rule says |
|---|---|
| Mortgage given by a corporation | Sections 40 and 41 do not apply, though they apply to an action against an individual |
| Certain National Housing Act and high-ratio mortgages | Excluded from the transferee protection, so insured mortgages can carry personal liability |
| Land type and use | Individual protections apply only to residential and farm land, and not where the individual or a family member has ever used the land as a bona fide residence in the residential case; the individual bears the burden of proof |
Whether these rules protect you depends on the mortgage type and the facts, so confirm your position with a lawyer before assuming you are safe.
Reverse mortgages and how title actually changes
A reverse mortgage is different. The death of the last borrower triggers repayment, and the estate typically has a limited window. Lenders set their own timing policies, and settling an estate may take longer than the repayment window.
For an ordinary mortgage, what the lender may do on a death, such as whether it can require payout, allow someone to assume the loan or require refinancing, depends on the mortgage contract and the lender's policy. Read the mortgage documents and ask the lender directly.
- Joint tenants: the surviving owner can remove the deceased by filing a Statutory Declaration regarding Proof of Death with an original or notarized death certificate, and no grant of probate is needed.
- Tenant in common or sole owner: the land passes through the estate, and Land Titles requires an Application for transmission to personal representative with an original filed copy of the Grant of Probate or Letters of Administration from the Surrogate Court of Alberta. A notarized copy is unacceptable.
- Grant from outside Alberta: it must be re-sealed by the Surrogate Court of Alberta before Land Titles will accept it.
What to do next
- Find the mortgage documents and note the lender, type of mortgage and whether it is insured or a reverse mortgage.
- Check the land title to see whether the deceased owned as a joint tenant, tenant in common or sole owner.
- Read the will for any express reference to the mortgage, not just a general direction to pay debts.
- Contact the lender to ask about its policy after a death, and ask a lawyer how mortgage payments should be handled while the estate is being settled, since that depends on your situation.
- Hold off on distributing estate property until the mortgage and other debts are understood, since a representative is subject to the liabilities and duties of a trustee.
- Speak with a lawyer if the mortgage is corporate, insured, a reverse mortgage, or the will is unclear.
Frequently asked questions
Does the person who inherits the house have to pay the mortgage?
Unless the will or another document shows otherwise, the mortgaged property is primarily liable for its own mortgage debt as between those inheriting through the deceased. A general direction in the will to pay debts does not change that, but an express reference to the mortgage can.
Can the lender go after other estate assets?
The Estate Administration Act's rule about who bears the mortgage among beneficiaries does not, by itself, stop a mortgagee from pursuing other estate property. However, Alberta's Law of Property Act generally restricts a mortgagee's right to the land and foreclosure, with no action on the covenant for payment, though this does not apply to mortgages given by a corporation and has other limits. Secured creditors also keep their security.
Can I be sued personally if I take over a mortgaged home?
Alberta law generally says no action may be brought against an individual who is a transferee of land subject to a mortgage. Exceptions include certain National Housing Act and high-ratio mortgages, and the protection applies only to residential and farm land.
Do I need probate to transfer the house?
It depends on how the house was owned. A surviving joint tenant can use a Statutory Declaration regarding Proof of Death without probate, while land owned as a tenant in common or by the deceased alone passes through the estate and needs a grant.
Sources
- Estate Administration Act, SA 2014, c E-12.5 (Alberta King's Printer) — kings-printer.alberta.ca
- Law of Property Act, RSA 2000, c L-7, s. 40 — kings-printer.alberta.ca
- Financial Consumer Agency of Canada – Reverse mortgages — canada.ca
- Alberta.ca – Change land title ownership — alberta.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
This is a wills & estates question
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