Obtaining a mortgage can take a lot of time and effort. In many cases, you and your co-borrower can spend years compiling the necessary requirements, such as a down payment, proof of income and legal requests, to obtain a joint mortgage and buy property. The co-borrowers share equally in the care of property and the payment and handling of the mortgage note. When one of the co-borrowers dies, the remaining borrower must take action on the mortgage and property and set the affairs of the deceased co-borrower in order.
Review Closing Documents
When a co-borrower dies, the surviving borrower will need to read over the papers signed at the property's closing to determine the guidelines for survivorship. The location of your property will determine the next steps that you can take with regards to removing the deceased borrower's name from the mortgage and shifting it entirely into the survivor's name. The result may vary from simply signing a few documents to getting a refinance of the mortgage, or even going into court to settle the matter. Your title company or lawyer can best assist you in this evaluation.
Many times, mortgage companies will have insurance provisions in place in the event of death. While many contracts may already stipulate that the property will pass directly to the surviving borrower, it is not automatically written into every mortgage contract. In some cases, there may be insurance that would allow the property to be considered paid-off if one of the co-borrowers passes away. If the debt gets passed on, you can look into re-financing the mortgage as the sole borrower if your finances permit it.
Determining Income and Mortgage Payments
Upon a co-borrower's death, the surviving borrower will need to assess his updated cash on hand, investment assets, if applicable, and debts. The surviving borrower must account for any investments the deceased borrower may have held -- things like life insurance policies, retirement plans, trusts and annuities. These may allow the survivor to keep up to date on paying off the mortgage in question, lower the debt burden to be passed on and help his case in the event the matter is forced to go to court.
Some jurisdictions state that when a co-borrower on a note dies, the mortgage should be brought before a probate court. The court will decide if the surviving co-borrower can adequately pay the mortgage note based on a review of her revised income. In some cases, if the amount of income or cash on hand does not appear to satisfy the outstanding debt, a judge can either order a refinancing of the property, a hardship modification of the mortgage or a sale of the property to meet outstanding debts if no other solutions are possible.