In most cases the lender cannot call the whole loan due just because the house passed to a relative when the borrower died, because federal law bars that for homes with fewer than five units (12 USC 1701j-3(d)). Keep the payments, insurance and taxes current while you sort out who legally owns the house, then decide whether to keep it, refinance, sell or let it go.
Updated . Sources are listed at the bottom of this page.
You are dealing with a loss and a stack of paperwork at the same time. You do not have to solve everything this week; the first goal is simply to keep the house safe and the loan from falling behind.
A mortgage stays attached to the house after the borrower dies. The loan has to be paid, from the estate, by whoever keeps the house, or from the money when the house is sold.
The good news is a federal law called the Garn-St Germain Act. For a home with fewer than five units, it stops a lender from using the "due-on-sale" clause when the house transfers to a relative because the borrower died, or passes to a surviving joint owner (12 USC 1701j-3(d)). It also covers a transfer where the borrower's spouse or children become an owner. In plain terms, the lender usually cannot demand the full balance just because you inherited.
That does not mean you can stop paying. If the payments stop, the lender can still foreclose for missed payments.
Call the company that collects the payments (the servicer) and tell them the borrower died. Federal rules require servicers to have procedures to communicate with people who may be a "successor in interest," meaning someone who now has an ownership interest in the home (12 CFR 1024.38). Once the servicer gets notice of the death, it is supposed to promptly tell you which documents it needs to confirm you, such as the death certificate and proof of your ownership.
Once the servicer confirms you, you are treated as a borrower under the federal mortgage servicing rules (12 CFR 1024.30(d)). That means you can request information about the loan, and you can apply for help such as a loan modification, even if you are not on the loan.
How the house passed decides who can sign for it. Check the deed and any will.
Indiana allows transfer on death deeds (IC 32-17-14). If the owner signed one and it was recorded with the county recorder before the owner died, the house passes to the named beneficiary without going through probate. A transfer on death deed that was not recorded before death does not work.
If the house was owned with someone "with right of survivorship" or as husband and wife (tenants by the entirety), the surviving owner usually becomes the sole owner.
Indiana has a simpler process for small estates. For a death after June 30, 2022, the limit is $100,000 in probate assets, after liens and reasonable funeral expenses are subtracted (IC 29-1-8-1). The affidavit for personal property can be used 45 days after the death. For real estate, a separate affidavit can be recorded with the county recorder when the estate is under the limit (IC 29-1-8-3). Because the limit is figured after subtracting liens, a house with a mortgage may still fit. Ask the court clerk or an attorney whether your estate qualifies.
If none of the above applies, someone usually opens a probate estate in the county court and is appointed personal representative. Indiana allows "unsupervised administration" in many estates, where the personal representative can handle things, including selling real estate, without a separate court order for each step (IC 29-1-7.5-3). The court decides whether an estate can be unsupervised.
Because of the federal rule above, you can usually keep the existing loan and keep paying it on the same terms. Ask the servicer about formally assuming the loan once you are confirmed.
You can apply for a new loan in your own name to pay off the old one. This can make sense if you want to change the payment or take a co-heir's share out.
Selling needs someone with legal authority to sign: the personal representative of the estate, the transfer on death beneficiary, or all the heirs on title. If the sale price covers what is owed, the mortgage is paid off from the money at closing. If it does not, the lender has to approve the sale as a short sale. See selling an inherited house in Indiana.
If the house is worth less than the loan, you may decide not to keep it. Heirs are not usually personally responsible for a parent's mortgage unless they signed it, but the estate's assets can be used to pay debts. Talk to an attorney before you walk away, and ask the servicer about a deed in lieu of foreclosure.
Be careful with anyone who asks you to sign over the deed before you are paid, or who asks for an upfront fee to "save" the house (a licensed attorney charging legal fees is different).
In most cases, no. For homes with fewer than five units, federal law bars the lender from calling the loan due because of a transfer to a relative on the borrower's death (12 USC 1701j-3(d)). You still need to keep the payments current.
Tell them in writing that the borrower died and ask to be confirmed as a successor in interest. Federal rules require servicers to tell you what documents they need and, once you are confirmed, to treat you as a borrower for servicing purposes (12 CFR 1024.38 and 1024.30).
Not in every case. A recorded transfer on death deed, survivorship ownership, or the small estate process can avoid a full probate. If none applies, a personal representative is usually appointed by the court and can sell the house.
For deaths after June 30, 2022, it is $100,000 in probate assets after liens and funeral expenses (IC 29-1-8-1). Ask the court clerk or an attorney whether your estate qualifies.
Usually not, unless you signed the loan. But the loan stays on the house, so if no one pays, the lender can foreclose. Talk to an attorney about your situation.
A HUD-approved housing counselor at 1-800-569-4287, and Indiana Legal Services for estate questions.
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This page is general information, not legal or tax advice. For your specific situation, consult a licensed attorney in your state or the relevant agency. Orrindale is a matching service, not a law firm, lender, or government program.