Which states allow mortgage exoneration upon death?
My fiancee is studying for the California bar exam and during the course of studying she came across the fact that some states allow "mortgage exoneration". This concept means that if someone dies and owns a property that has a mortgage on it, as long as that property is willed to someone else, the mortgage will be "exonerated". Therefore, the house immediately becomes paid off without the estate having to pay the money. This seems strange to me because mortgage companies risk losing money when they lend to someone. They must make this up in a higher interest rate for everyone in the state or some other way. Apparently this is part of "common law" - does anyone know if there are any states that allow this?
Answers:
Here in Pennsylvania that's true---only if the person whose name the mortgage is in has life insurance on that loan.That pays off the loan.If they don't have the insurance(most banks don't give u a choice), then the spouse is responsible for the mortgage owed. Hope this helps!
As best I can find, "exoneration" is through payment by the estate. Without exoneration, an encumbered property reverts to the lien holder on the death; with exoneration, it's paid off by the estate and can be inherited.
No link because no clear-cut answer that I could find.
My best knowledge Mortgage exoneration , is mortgage protection that you can sign up for in case of death or illness. I know for a fact this isn't Texas, Florida , California.
post the answer when or if you find out ..i wouldn't mind moving some relatives there.
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