A home loan can be a considerable debt that lenders may not be willing to write-off if the borrower dies. Usually, lenders allow the heirs or descendants of the borrower to take over the home loan and pay it off as per the agreement. In some cases, however, the borrower may not have prepared a will or chosen an heir to take over financial responsibilities in the event of their death. If the borrower’s heirs wish to keep the property, they have the following options to repay the loan.
- If there’s a co-signer or a guarantor for the loan, this person will have to repay the remaining loan amount.
- If the deceased person had bought a life insurance policy, the payout could be used to repay the outstanding loan balance.
- If there’s no life insurance policy, or the payout is insufficient, the executor of the borrower’s estate will have to pay the loan amount by selling the borrower’s other assets.
In case the heirs do not wish to keep the property, they can request the lender to recover the loan amount by selling the property, or sell it themselves and pay off the loan. However, they may still need to sell other assets if the property’s market value isn’t enough to cover the loan balance.