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Home >> Special Situations >> Deceased Individuals
Purpose of "Due and Payable" Clause
My father and I own our home as joint tenants with rights of survivorship, and we are also both on the bank note. When he dies, his ownership interest passes directly to me. Would this bring about the "Due and Payable" clause in the note or is this clause included by the bank for other reasons?
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 A "Due and Payable" clause specifies when the loan is due and payable, generally meaning in full. It is not likely that the lender would call the loan due when one obligor passes away, if there is another obigor able to make the payments.
That said, it depends on how your mortgage is written. Death is generally an event of default. Technically, your mortgage could say that if if there is any event of default, the lender could call the loan, due and payable in full. A reputable lender wouldn't do this if there is someone else, including the estate, paying the loan. The lender doesn't want the property, they want the loan payments. You shouldn't have issues, but if you for any reason suspect you could have issues, use an attorney familiar with your state's laws to properly plan both your estates. What if you passed first?
Published on BankingQuestions.com 12/19/07
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