A cosigner has no rights over your property unless you include their name in the deed.
Owning a home can be very expensive, especially when you have a limited source of income. However, this has not discouraged most people from investing or owning a property. To meet the financial requirements for home loans, people turn to their kin and friends for support as cosigners. In the recent past, people have been asking, ‘who inherits the property after the death of a cosigner?’
This question has never been an issue in most homes since married couples usually cosign for a home or property. This way, when one of them dies, the other can take over the responsibilities of servicing the mortgage or property loan while maintaining ownership of the property. However, before determining who inherits property in case a cosigner dies, you need to know the role of a cosigner.
The cosigner’s role is to vouch for you and promise to take up the loan payment if you are no longer able to. When a cosigner dies, you automatically lose your guarantor. However, most financial institutions and lenders put in place protection clauses to guard against such scenarios. Under these clauses, you can know what happens if your cosigner dies.
It would be best if you also understood the difference between cosigning and co-ownership. An individual can offer surety for your home but cannot have co-ownership unless you include their name in the title deed, which is common in marriage. However, you can get a parent, sibling, or friend to cosign for a mortgage. This means when you are unable to meet the payments, then the lender can foreclosure the house and demand payment from the cosigner.
What happens when a Cosigner Dies?
All through the article, you have looked at who inherits a property when a co-signer dies. However, other repercussions come with death. For instance, a lender may include a clause that obligates the cosigner’s estate to service the loan at once, even with a good payment record. On the other hand, if you remain disciplined and continue making your payments, you don’t have to worry about any problem as the primary borrower.
As stated before, several guiding clauses in your loan agreement determine your actions and that of the lender. They include:
- Cosigner successor clause- in this clause, the cosigner’s estate is liable for the debt if the cosigner dies.
- Automatic defaulter clause- this clause impacts the primary borrower directly when the cosigner dies. This clause gives the lender the right to demand full payment immediately after the death of the cosigner.
- The cosigner release clause gives you the ability to remove a cosigner once you can service the loan on your own.
Who Inherits the Property?
A cosigner has no rights over your property unless you include their name in the deed. If you co-own the property with the cosigner, you need to review your agreement or contract to determine what happens when the cosigner dies. If the property is owned under joint tenants with the right of survivorship, the remaining owners get a share of the property if the cosigner dies. However, if this clause is not in agreement, then the cosigner’s share in the property is passed down to their legal heir.
At this point, you may need to contract the services of a lawyer to help settle the dispute. These lawyers are well suited to handle scenarios where a cosigner dies without stating their position on the matter, especially if they were also listed as co-owners. Once you are on the same page, you can hire an estate planner to help streamline the entire process. However, a real estate lawyer with experience can help with everything from settling the dispute to dividing the property among beneficiaries.