Does a mortgage payment increase when a borrower dies?

[keryer]

What is the name of your state? NM

I'm asking on behalf of someone else so I don't have all the details. Basically the borrower and co-borrower are divorced. The borrower was a veteran so he got a vet discount, but I don't know if it was a VA loan. He passed away, so his ex moved back into the house and is making the mortgage payments. We want to know if the discount drops off when his death is reported to the lender, or if she will have the same monthly payments.

 

[quincy]

What is the name of your state? NM

I'm asking on behalf of someone else so I don't have all the details. Basically the borrower and co-borrower are divorced. The borrower was a veteran so he got a vet discount, but I don't know if it was a VA loan. He passed away, so his ex moved back into the house and is making the mortgage payments. We want to know if the discount drops off when his death is reported to the lender, or if she will have the same monthly payments.

The payment should remain the same.

By the way, it is difficult for us to answer questions posed by third parties. The divorced co-borrower should speak to the lender.

 

[LdiJ]

What is the name of your state? NM

I'm asking on behalf of someone else so I don't have all the details. Basically the borrower and co-borrower are divorced. The borrower was a veteran so he got a vet discount, but I don't know if it was a VA loan. He passed away, so his ex moved back into the house and is making the mortgage payments. We want to know if the discount drops off when his death is reported to the lender, or if she will have the same monthly payments.

The principal and interest portion of the payments should remain the same. However, the portion of the payment that is for property taxes and homeowner's insurance could change. It is important that the ex get the insurance changed into her/his name. Also, ownership of the home could be an issue. If he received the home in the divorce the deed may have been changed over to just him. Therefore she could be paying the mortgage on a property that belongs to whomever would have been his heir(s).

 

[quincy]

Your friend first needs to make sure she actually is on the house deed and not just on the loan. Then, if she is on the deed, she needs to learn if her ex willed his interest in the house to anyone.

She should speak with an attorney in her area for a review of the divorce and the house and the estate documents.

 

[Taxing Matters]

The details are critical. But it's not the loan terms she needs to be concerned about. She needs to find out whether the VA may call the entire loan due immediately as a result of his death by invoking its due on transfer clause. You said she's a co-borrower. That suggest she may also have been an owner on the deed. But she doesn't want to assume that. She needs to get a copy of the deed and take that to an attorney.

If she she's not on the deed and was not awarded any share of the house in the divorce then she has no ownership interest in the home. In that case, paying the mortgage on a home she doesn't own isn't going to benefit her.

If she's on the deed, then it matters exactly how the title was held between them. If the home is in NM and that's where they got the divorce then they likely held the property as community property while married. Typically when spouses divorce any community property they had ends up with each former spouse holding their share of the property as tenant in common (TIC). That matters because if it's TIC then it's going to matter to whom his share goes.

There is more to the analysis than this. It can get complicated which is why I recommend she consult a real property lawyer.

 

[keryer]

She is still on the deed. He didn't leave a will, but when they divorced, he agreed that she'd get the house if he dies. The deed info shows a $4000 veteran exemption adustment.

 

[quincy]

She is still on the deed. He didn't leave a will, but when they divorced, he agreed that she'd get the house if he dies. The deed info shows a $4000 veteran exemption adustment.

VA loans are assumable so the loan itself probably is not a problem. She could just continue paying on it. However there are so many other issues involved that an attorney should be consulted.

I think these issues probably would have been better resolved prior to her moving into her ex-husband’s house. I hope her ex-husband did not leave behind family members who are fighting her occupancy in the house.

 

[zddoodah]

The borrower was a veteran so he got a vet discount

I assume that "discount" in this context refers to a lower interest rate.

We want to know if the discount drops off when his death is reported to the lender, or if she will have the same monthly payments.

Your friend will need to read the loan documentation. My first question would be whether there's any obligation to report the death to the lender. Even if there is, I would be very surprised if the death of one of the borrowers resulted in the terms of the loan changing.

Regardless, I agree with the prior responses to the extent that there are potential issues resulting from the divorce status (especially if your friend and her ex had kids together). She needs to consult with a local attorney.

 

[quincy]

I assume that "discount" in this context refers to a lower interest rate.




Your friend will need to read the loan documentation. My first question would be whether there's any obligation to report the death to the lender. Even if there is, I would be very surprised if the death of one of the borrowers resulted in the terms of the loan changing.

Regardless, I agree with the prior responses to the extent that there are potential issues resulting from the divorce status (especially if your friend and her ex had kids together). She needs to consult with a local attorney.

With VA loans, the death of the veteran must be reported to the lender.