Who Pays for the Mortgage Debts and Medical Bills After Death?

After the death of your loved one, there may be mortgages, debts and/or bills to shoulder.

Who takes over these liabilities? What means are available to pay for them? Fret not, here are the answers to some of your pressing questions and the possible solutions to pay off these liabilities.

First and foremost, what is a mortgage?

A mortgage is a legal document that you will offer to your lender in exchange for a legal claim to your property. On the other hand, a home loan is one that you actually receive a loan to purchase a home.

Therefore, a mortgage is one where the property serves as collateral while a home loan can be secured or unsecured.

A person who takes up a mortgage is the “mortgagor” or the borrower.

Will My Family and I Inherit the Mortgage from the Deceased Mortgagor?

Generally, you and your family will not inherit the mortgage if the mortgage was signed solely under the deceased’s name, i.e. the deceased did not co-sign the mortgage with you or any other member of the family.

If so, the executor or administrator of the deceased’s estate (depending on whether the deceased had made a will) will sell the property to pay off the mortgage.

However, if you or another family member had co-signed the mortgage with the deceased mortgagor, then that person will inherit the mortgage.

The mortgage co-signor will then assume the mortgage responsibilities of the deceased as a sole debtor. What will happen after that will depend on:

• How the property was paid for (e.g. bank loan or CPF)
• Whether the property in question is a private property or an HDB flat

1. If the deceased mortgagor paid for the property (whether private property or HDB flat) through bank loans

The surviving mortgagor will have to bring a Grant of Probate to the bank as evidence that he or she has rights to assume responsibility of the mortgage.

Due to the multitude of supporting documents needed in a court application, it is certainly advisable to hire a lawyer to handle the paperwork to obtain the Grant of Probate.

Upon which, the surviving mortgagor can discuss with the bank of the possible ways to pay for the mortgage, especially when he or she do not have the means to do so.

What happens if we can’t repay the mortgage loan?

If the surviving mortgagor is ultimately unable to repay the loan, the lending bank has the right to foreclose on (take possession of) the property.

If the property in question is a private property, do also check if a mortgage insurance has been taken out. Known as Mortgage Reduced Term Assurance (MRTA), this insurance can pay out a sum of money if one of the mortgagors passes away.

2.  If the deceased mortgagor paid for his or her HDB flat through CPF

If the mortgagor had used his CPF account savings to pay the monthly bank loan instalments of his or her HDB flat, he/she would have been insured under the Home Protection Scheme (HPS).

Under the HPS, if the mortgagor passes away, the CPF Board will settle the outstanding housing loan up to the insured sum, with HDB or the bank which provided the housing loan, directly.

The HPS is compulsory for all individuals who use their savings from their CPF account to pay for their HDB flat.

The HPS does not cover private residential properties, such as executive condominiums (ECs) or privatised Housing and Urban Development Company (HUDC) flats.

You can apply to be covered under HPS at HDB Hub or any HDB branch office when you are applying to use your CPF to pay the monthly housing loan instalments. More information on the HPS can be found here.

What Happens to the Deceased’s Mortgage Debts?

Mortgage debts may arise when the mortgagor passes away and misses out on monthly loan repayments.

The first option is to assess if any of your family members can contribute to the management of the debt. If so, you can put their name on the deed (a legal document regarding the ownership of property) and make them a co-mortgagor.

You can also find out about the legal procedures on how debts can be paid off after the debtor’s death here.

What Happens to the Deceased’s Hospital Bills?

If the deceased left behind medical bills, you can settle them through his or your Medisave account and/or MediShield Life (a compulsory basic health insurance plan for all Singapore Citizens and Permanent Residents).

Insurance claims can also be submitted under the Dependants’ Protection Scheme (DPS), which is a term insurance that provides insured members and their families with basic coverage of up to $46,000 after an insured member’s death.

You can get a further boost in funds to pay for the deceased’s medical bills from the disbursement of the deceased’s CPF funds and/or bank account monies.

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The events after the death of a loved one are saddled with many difficulties, not only emotionally but also financially. It is therefore essential to err on the side of caution and make adequate preparations in case of an unfortunate event.

After the deceased has passed away, you will also need to settle his estate by applying for a Grant of Probate or a Grant of Letters of Administration. You can consider contacting a probate lawyer for assistance on these matters.