What Happens if You Are on a Title but Not on a Loan & the Person Dies?
When someone dies, her creditors, including her mortgage lender, still expect to be paid. If someone -- a co-owner, an heir or the decedent's estate -- doesn't pay the mortgage, the lender can take possession of the house. If you're co-owner on the house but your name isn't on the mortgage agreement, that won't stop the lender from foreclosing if the mortgage payments stop.
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Ownership
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The first thing to establish is whether your co-owner's death makes you sole owner. If your ownership is a joint tenancy with right of survivorship, or a tenancy by the entireties, you automatically inherit your co-owner's share. Otherwise, it's possible he could leave his share of the house to a spouse or a child. If you acquire a new co-owner, you will have to consult with him about the mortgage loan and what should be done about it.
Probate
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In some cases, such as when you have the right of survivorship, you can bypass probate and take full ownership immediately. Otherwise, your co-owner's share of the property will probably go into probate, even if you ultimately inherit all of it. The executor will have to pay for maintenance and mortgage payments out of the estate funds until probate ends. Depending on the terms of the will, the estate may pay off the mortgage debt, if it has enough money to do it.
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Taking Over
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If you're not on the mortgage promissory note, the lender has no claim against you. She can take the house, but if that doesn't wipe out what your co-owner owes, the lender can't sue you for the deficiency. If the estate isn't going to pay off the loan, you'll have to assume responsibility for the mortgage if you want to keep the property. If you can't make a lump sum payment, meet with the lender. The bank may require that you refinance so that it has a living person's name on the loan.
Considerations
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If you have to refinance, or must keep making payments without refinancing, consider first whether this is something you can afford. If you can't handle the mortgage and any other payments your co-owner covered, such as insurance or taxes, you're not going to be able to keep the house. It might be better for you financially if you looked for someone to buy your ownership share before the lender decides to take the property back.
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