What happens to joint mortgages in the event of death?
What if two people have a joint mortgage and one of them dies? Who will be responsible for paying? Can you stay there? Can one inherit debts?
Basic principle: Joint loans are paid by the survivor
If two people have a joint loan, both are jointly and severally liable. This means that if one of them disappears out of the picture, then the entire loan is transferred with interest and amortization to the surviving borrower.
This is usually handled so that the bank claims the estate for the entire loan amount, if there is enough money. The survivor then owes the estate half that sum. This is called a right of recourse. If there is not enough money in the estate, the surviving spouse can in most cases take over the entire remaining loan.
The above applies to joint loans. If, however, only one spouse has a loan, then it is taken over by the estate. Should the estate of the estate not suffice, it can go bankrupt. But a single spouse’s or parents’ entirely private debts cannot be inherited. However, for example, a common home may be sold and half the amount used to cover the estate’s debts.
Mortgage protection in the event of death
One way to secure a spouse / partner is to take out a mutual life insurance on an amount sufficient to cover the loan. The amount then paid out can be used in the way the beneficiary decides for himself. For example, to fully or partially redeem a mortgage – or to allow the survivor to afford the loan.
If you have a service group life insurance, then an insurance amount is included in the event of death, which is usually six price base amounts. (For 2019, the base amount is SEK 47,400. Once six, it will be SEK 284,400.) This may not be enough to solve a normal mortgage, but can be a good help along the way.
If you have an occupational pension or a private life insurance, you can also have a survivor’s insurance, which is paid out in the event of death.
Plan for a safe future in the event of death
A good rule might be to hope for the best, but plan for the worst.
It is best to sort out the economy around your mortgage as soon as possible. You never know when or if you can suffer from illness or an accident. Although it feels unlikely.
Should something happen, money may be no direct comfort in grief. But good protection can make grief easier to bear. Especially when it comes to something as important as housing.
A loan advisor or family lawyer can help you create a secure solution that is tailored to your particular circumstances.