What happens to a HELOC when the owner dies?

What federal HELOC rules say

• Federal rules limit when a HELOC can be ended early. One listed reason is when “Any action or inaction by the consumer adversely affects the creditor’s security for the plan” (12 CFR 1026.40(f)(2)(iii)).
• The official interpretation of that rule gives examples, including “The sole consumer obligated on the plan dies.”
• If there were two borrowers, it says: “If one of two consumers obligated on a plan dies the creditor may terminate the plan and accelerate the balance if the security is adversely affected.”
• The line’s holder does not have to call the balance due. The interpretation says it “may instead take actions short of terminating and accelerating,” for example to “temporarily or permanently suspend further advances, reduce the credit limit, change the payment terms, or require the consumer to pay a fee.”
• What your family’s line says is in its agreement. Read the default and termination sections, or have your attorney read them.

A separate federal law on transfers at death

• The Garn-St Germain Act says that for a loan on a home with fewer than five units, “a lender may not exercise its option pursuant to a due-on-sale clause upon ... a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety” or “a transfer to a relative resulting from the death of a borrower” (12 U.S.C. 1701j-3(d)(3) and (d)(5)).
• The federal rule that carries this out adds occupancy conditions. It applies “With respect to any loan on the security of a home occupied or to be occupied by the borrower,” and for a transfer to a relative it requires that “the transferee is a person who occupies or will occupy the property” (12 CFR 191.5(b)).
• How this law fits with the HELOC rule above for a particular line depends on the agreement and the facts. That is a question for your probate attorney, not for this page.

The first mortgage and the line are treated differently

• The CFPB’s servicing rules protect a successor in interest, which 12 CFR 1024.31 defines to include “A transfer to a relative resulting from the death of a borrower.” A servicer must, “Upon receiving notice of the death of a borrower ... promptly facilitate communication with any potential or confirmed successors in interest” (12 CFR 1024.38(b)(1)(vi)(A)).
• Those rules are written for closed-end mortgages. For them, Regulation X’s “mortgage loan” “does not include open-end lines of credit (home equity plans)” (12 CFR 1024.31). Regulation Z defines a successor in interest by reference to “a dwelling securing a closed-end consumer credit transaction” (12 CFR 1026.2(a)(27)(i)).
• In plain terms, an inherited home’s first mortgage comes with those successor protections. The HELOC, by the rules’ own wording, does not. Ask the line’s servicer in writing what it needs from you anyway.

Who owes the balance

• The CFPB says: “When someone dies, their debts are generally paid out of the money or property left in the estate.”
• It also says survivors are “not responsible for their debts unless you shared legal responsibility for repaying as a co-signer, a joint account holder, or if you fall within another exception.” A surviving co-borrower on the line is still a borrower.
• One listed exception: “You’re a surviving spouse and you live in a community property state that requires surviving spouses to use jointly-held property to pay debts of a deceased spouse.” The CFPB’s list includes Arizona and California.
• The line is secured by the home. If no one pays it, the home is at risk, whoever owns it now.

What heirs usually do

• Tell the servicer. The CFPB suggests telling the loan servicer when you inherit a home, and says proof “might include a copy of the executed will and the death certificate or a letter from the executor of the deceased person’s estate.”
• Ask for a payoff and the account status in writing, and ask whether new draws have been stopped.
• Keep the home insured and the taxes paid while the estate is settled.
• Then choose: sell the home and pay the line from the sale, pay it from other estate money, or replace it with a loan in an heir’s name once the home is on title in that heir’s name.

Can an heir get a HELOC on the inherited house?

Yes, once the home is on title in your name. I cannot arrange a loan while the estate is in probate. Once title is yours, I arrange home equity lines and other loans in an heir’s own name, including a loan that pays off the old line at closing. Your terms depend on your file.

• Why title comes first. Loans are made to owners. The CFPB ties an heir’s ability to take over a loan to already having title: “If you already have title to the house, the CFPB’s rules don’t require the lender or servicer to determine your ability to repay before it lets you take over the mortgage loan.”
• A note on cash-out refinances only. Fannie Mae’s rules for a cash-out refinance, which replaces the first mortgage and is a different product from a HELOC, require a borrower on title, and add for those refinances: “There is no waiting period if the lender documents that the borrower acquired the property through an inheritance” (B2-1.3-03). That sentence is about cash-out refinances. It says nothing about a home equity line.
• How title reaches you depends on how the home was held and on state law. A trust, a joint tenancy, a transfer-on-death deed, a court order, an affidavit or a full probate are all possible paths. Your probate attorney or the trustee can tell you which one applies and when it will finish.
• What gets checked once you are on title: your income, your credit, the home’s value, how you will use the home, and anything recorded against it, including the old line.
• If several heirs own the home together, a loan usually needs every owner’s agreement. The sibling buyout page covers buying out the others.

State notes (probate basics)

General information only. Thresholds change, and how they apply depends on how the home was held. Confirm with a probate attorney.

• California. A small estate affidavit under Prob. Code 13100 is for personal property. The court’s self-help page says: “You cannot use this type of Affidavit to transfer real property (like a house, building, or land).” For a primary home, Prob. Code 13151(a) allows a petition for a court order when the gross value of the home does not exceed a limit set in the statute, adjusted periodically under Section 890, and “40 days have elapsed since the death of the decedent”. Prob. Code 13200 allows an affidavit for real property of small value “No sooner than six months from the death of a decedent.” For deaths on or after April 1, 2022, the limit is “the adjusted dollar amount, published in accordance with subdivision (c) of Section 890, in effect on the date of the decedent’s death.” Check the Judicial Council’s current list (form DE-300). For community or quasi-community real property, Prob. Code 13540(a) says that “after 40 days from the death of a spouse, the surviving spouse ... has full power to sell, convey, lease, mortgage, or otherwise deal with and dispose of” it, subject to section 13541.
• Utah. Utah Code 75-3-1201 lets a successor collect personal property by affidavit when the value of the estate, less liens and encumbrances, does not exceed a limit set in the statute, and “30 days have elapsed since the death”. The Utah Courts say a small estate affidavit “cannot be used to transfer title to real property like land or a house,” and that probate is required if “the estate includes real property (land, house, condominium, mineral rights) of any value.”
• Oregon. A simple estate affidavit is limited to estates under value limits, one for personal property and one for real property, set in ORS 114.510(1)(a) (the statute groups certain other property into each limit). Value is counted “without reduction for liens or other debts” (ORS 114.510(2)(b)). It “may not be filed until 30 days after the death of the decedent” (ORS 114.515(3)). When the affiant transfers real property, the affiant records “a bargain and sale deed conveying the property to the person entitled to the property” (ORS 114.555(3)).
• Arizona. A.R.S. 14-3971(E) allows an affidavit of succession to real property “Not sooner than six months after the death of a decedent” when the value of the real property in the estate located in Arizona, less liens and encumbrances, does not exceed a limit set in the statute, among other conditions. The recorded certified copy goes to “the office of the recorder in the county where the real property is located” (14-3971(F)). For personal property, 14-3971(B) sets a separate limit, less liens and encumbrances, after “Thirty days have elapsed since the death”.

Questions people ask next

Related questions

• What happens to my HELOC when I sell my house?
• Can I buy out my siblings on a house we inherited?
• My parent had a reverse mortgage and passed away. Can I keep the house?
• Can I get a HELOC on a house held in a living trust or an LLC?
• Can I get a HELOC on a paid-off house?

Two ways to take the next step