The last thing you want to think of after a loved one passes away is what happens to the mortgage. If this recently happened to you, I'm incredibly sorry for your loss and hope this can help you with the next steps.
If you recently inherited a home from a loved one's passing, your best first step is contacting the mortgage servicer or original lender. The information below is broad, and state regulations vary.
Who Takes on the VA Mortgage?
There are a few different options for who inherits the home, all of which depend on the will or probate arrangements. In most cases, that's a spouse, Veteran co-borrower, co-signer or designated beneficiary.
If the inheritor is a co-borrower or co-signer, they are required to keep making payments on the home.
Keep in mind, if you leave your home to a beneficiary, or it's assigned one through probate, that individual only receives ownership of the home, not mortgage. They must contact the servicer to determine how to assume the mortgage or take out a new one.
Failing to notify the servicer or making payments may result in foreclosure.
What if I Can't Pay the Mortgage?
If you're unable to afford the payments, there are a couple of options.
First, you can sell the home. Selling is one way to avoid unaffordable payments that could lead to default or foreclosure.
If selling is the last resort for you, the other option is refinancing. If there's enough equity in the home, you could potentially reduce payments by extending the life of the loan - as long as you qualify.
In either case, your first step is contacting the mortgage servicer or original lender to inform them of the Veteran's passing. Once notified, they can guide you through transferring the mortgage with your specific financial situation in mind.
What Can I Do Now to Prepare?
If you haven't yet experienced a loved one's passing or are preparing your finances, one thing you could consider is term life insurance from a qualified private insurance company.
Term life insurance may help protect your loved ones from having to sell the home after your passing.
You could also consider mortgage life insurance. However, many financial analysts suggest mortgage life insurance benefits the lender more than the individual who experienced the loss.