What happens to the mortgage when the borrower dies?
The mortgage does not disappear. The loan becomes a debt of the estate and the heirs who accept the inheritance must keep paying the instalments, each according to his or her share. If there was life insurance linked to the loan, it may cover the amount still outstanding. If nobody pays, the bank can enforce the mortgage and auction the flat. Anyone who does not want to put their own assets at risk can renounce the inheritance or accept it with the benefit of inventory.
Alburquerque Abogados
José Manuel AlburquerqueWhat to do first
- Notify the bank of the death and ask for a certificate of the amount outstanding on that date. For the “impuesto de sucesiones”, the Spanish inheritance tax, that debt is deducted from the value of the estate.
- Check whether there was life insurance linked to the loan. The certificate of life insurance policies from the “Ministerio de Justicia”, the Spanish Ministry of Justice, shows which companies the deceased was insured with. If there was such a policy, the insurer pays the bank the outstanding amount, up to the sum insured.
- Keep paying the instalments. The death does not change the terms of the loan or allow the bank to demand the outstanding balance all at once.
Who pays
- The heirs who accept the inheritance, each in proportion to his or her share. If they accept without an inventory, they are also liable with their own assets.
- If the loan was in two names, for example a married couple's, the other borrower still owes it, usually in full.
- Even if the debt is divided up, the mortgage is still secured on the whole flat. If it is not paid, the bank can enforce against the flat, whoever owns it.
- The heirs do not have to sign a change of borrower in order to keep paying. The bank cannot require them to take over the loan as a condition for releasing the money in the accounts.
This applies if the estate is governed by Catalan law. Under the Spanish Civil Code (“Código Civil”), once the estate has been divided, the bank can claim the whole debt from any of the heirs who accepted without an inventory.
The options
- Keep the flat and carry on paying. If only one heir keeps it, the others still owe their share to the bank for as long as the bank does not accept the change.
- Sell it and pay off the mortgage with the proceeds. The inheritance must be accepted first.
- If the debt exceeds the value of the flat and the rest of the estate, renounce or accept with the benefit of inventory. The inventory must be made within six months of learning that one is an heir.
- If they cannot pay, talk to the bank as soon as possible to negotiate.
This answer is provided for educational purposes and offers initial guidance on the question raised. Every matter has its own circumstances and nuances that require individual assessment. For that reason, before taking decisions with significant consequences, it is advisable to consult a professional and not to rely solely on this information. Personalised advice makes it possible to apply these explanations to the specific case and to assess the options available with greater certainty.