What happens when the holder of a mortgage loan dies?

03/05/2022

When the holder of a mortgage loan dies, the debt becomes part of the estate and, once the estate has been accepted, it is taken on under a joint ownership basis until the allocation and awarding of the inheritance is agreed.

It is normal, when dealing with an inheritance with debts, for some doubts to arise, such as the following:

What happens to the debt?

The debt remains unaltered. The terms and conditions that were originally established in the loan contract are kept the same until the outstanding amount is paid. There is no change to the interest, the maturity date, the associated expenses of the mortgage, etc.

Can we require our bank to allow only one of the heirs take over the debt?

No, the financial institution must include all the heirs as the holders of the mortgage loan (Article 661 of the Spanish Civil Code).

According to the law generally applicable in Spain, the heirs are subrogated to all the debts of the deceased person. Therefore, they cannot avoid their liability to the bank, even if they have reached an agreement among themselves on who is liable for the mortgage loan in the partitional notebook.

Therefore, if we want one or more heirs to become liable for the debt, we have to negotiate with the bank and reach an agreement.

Can the bank require additional guarantees from the heirs?

The bank must not require additional guarantees or the signing up to new products in cases where all the existing heirs (whether one or several) take over the debt.

However, in the event that, if there are several heirs, not all of them want to take over the debt and they reach an agreement with the bank, the bank may require additional guarantees or sign-up to a specific product.

If you have any doubts about the processing of a probate file, you can consult our section on Inheritance.