Mozo guides

Who has to pay off your home loan if you die?

Man on couch using laptop investigating what happens to his home loan if he dies.

For most Australians, paying off a home loan is a decades-long task. But what happens if you pass away before you get a chance to pay it off and discharge your mortgage

As with most situations involving debt, the answer will depend on your personal circumstances. Below, we take a look at what you can generally expect in cases where your mortgage obligations outlive you.

Does a home loan need to be paid back in full before you die?

Woman enjoying her home that she's fully paid the mortgage for.

Unfortunately, debts left behind after you die aren’t usually written off by your creditors. Most of them, including home loan debt, will need to be paid back in full.

If you’re the only person listed on your mortgage, that means the bank may turn to the beneficiaries named in your will to retrieve the money owed. 

If your beneficiaries can afford to pay, they will inherit the property as originally planned. But if their income and assets aren’t enough to cover the outstanding debt, they may be forced to sell the property.

Things get a bit complicated if you didn’t get a chance to draw up a will. In this case, your assets will generally be divided among family members and next of kin, and the potential for disputes may drag out an already burdensome process.

Speak to a solicitor about what happens to your assets, include your property and mortgage, after you die to come up with a plan. 

Does my partner have to pay off our home loan if I die?

If you are survived by a partner who was also listed on the home loan, it will be up to them to pay off the outstanding loan balance. The mortgage contract remains but with just your partner listed.

Ideally, your partner will be able to continue making mortgage repayments until the debt is paid off. But servicing a mortgage can be difficult on a single income, and in some cases refinancing or selling the property might prove to be the only workable solutions. 

Does a guarantor pay off your home loan if you die?

A guarantor is someone, usually a parent, who agrees to pay the debts you owe if you’re unable to meet your mortgage obligations. Guarantors are typically required to be home owners themselves, since the equity held in their property is used as security.

If you’ve taken out a home loan with the assistance of a guarantor, they will be asked to pay the mortgage in the event of your death, assuming you don’t have a partner or children who are able to make the repayments themselves.

You and your guarantor should discuss these possibilities and more with a financial advisor prior to entering any agreement. Having a guarantor can be a useful way to secure the property you want, but it’s important that everyone involved understands what’s required of them.

What happens if property sale proceeds don’t cover home loan debt?

If the value of your home has dropped since you purchased it, you might find yourself in negative equity. This is when the amount you owe on your mortgage is more than what your property is currently worth.

This might happen if you bought at the peak of a property boom and prices have subsequently fallen, or if you overpaid for your home and haven’t had time to build up enough home equity.

Whatever the reason, it will add an additional layer of complexity in the event of your death. If your family is forced to sell the property, they’ll be required to pay for the shortfall out of their own pocket.

This can place a significant financial burden on your family, particularly if they don’t have enough cash to pay the bank and are forced to sell other assets.

Examples of who is liable for your home loan if you die

Father and sons discussing what happens to the home loan if the father dies.

Dying with home loan debt and heirs: Joe is a 55 year-old man who dies in an accident, leaving his husband Neil and daughter Becky to deal with a $400,000 mortgage he had yet to pay off.

If Joe co-owned the property with his husband, Neil will take over responsibility for the home loan until it’s paid off. 

But if Joe was the sole owner of the property, whoever he nominated as the beneficiary in his will assume responsibility for the mortgage. This might be Neil, Becky, or some other family member.

If Joe’s beneficiaries cannot afford to repay the debt, they might lose the property. 

Dying with heirs and no home loan debt: On the other hand, if Joe had already paid off his mortgage by the time of his death, Neil and Becky would only have to worry about utility bills and council fees. 

Keep in mind that if Joe was the sole owner of the property and named his family in his will, then Neil and Becky would have to pay a concessional rate of stamp duty, which is a government tax incurred whenever the property title changes from one person to another, such as during a property sale or inheritance.

Each state has different rules around stamp duty, so make sure to read up on them.

Dying with home loan debt and no heirs: If Joe passed away with money owing on his home loan but no next of kin to pay it off, the bank will most likely take possession of the property. In these cases, the bank sells the property to recover the money it’s owed. 

How can I avoid messy financial situations with my home loan?

Death may be unpleasant to think about, but it’s necessary to plan ahead so you can avoid burdening your family down the track. One of the best ways to safeguard your family’s finances in the event of an unexpected death is having life insurance.

A life insurance policy is designed to pay out a lump sum to the beneficiaries you nominate in your policy in the event of your death, or if you get diagnosed with a terminal illness. So instead of assuming your debt (and all the stresses that come with it), your family can use the life insurance lump sum payment they receive to pay off the mortgage and retain the home.

Of course, you’ll need to make sure you have the right level of life cover. Ideally, the payout should cover the mortgage debt as well as any other living expenses (including future costs like your children’s education).

For more information, visit our life insurance comparison page. And if you’re looking to compare mortgage options, visit our home loan comparison page, where you’ll be able to filter your search by rate and type.

Compare home loans - last updated 19 April 2024

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure
  • Mozo Expert Choice Badge
    Express Home Loan

    Owner Occupier, Principal & Interest, LVR <90%

    interest rate
    comparison rate
    Initial monthly repayment
    6.01% p.a. variable
    6.14% p.a.

    Get fast online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.

    Compare
    Details
  • Flex Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR <60%

    interest rate
    comparison rate
    Initial monthly repayment
    5.99% p.a.
    fixed 3 years
    6.37% p.a.

    Competitive Fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

    Compare
    Details
  • Discounted Home Value Loan

    Owner Occupier, Principal & Interest, LVR 70-80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.09% p.a. variable
    6.09% p.a.

    Enjoy competitive rates for owner occupiers. Enjoy unlimited free extra repayments. Flexibility to redraw additional payments for free. No ongoing monthly service fee. Settlement fee waived on new borrowings from $50,000 (T&Cs apply).

    Compare
    Details
  • Neat Home Loan

    Owner Occupier, Principal & Interest, LVR <60%

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.16% p.a.

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

    Compare
    Details
Maria Gil
Maria Gil
Money writer

Maria has five years of journalism experience and is currently a finance journalist covering home loans and property, personal finance and the currency exchange market. She has also completed her ASIC RG146 (Tier 2).

Evlin DuBose
Evlin DuBose
RG146
Senior Money Writer

Evlin, RG146 Generic Knowledge certified and a UTS Communications graduate, is a leading voice in finance news. As Mozo's go-to writer for RBA and interest rates, her work regularly features in Google's Top Stories and major publications like News.com.au.

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.