Refinancing Your Mortgage After Death of a Spouse - What To Do
Losing a spouse is one of life’s most painful and disorienting experiences. Amid grief, you may also be faced with difficult financial decisions, especially if you shared a mortgage. Refinancing your mortgage after the death of a spouse can help stabilize your financial future, but the process can be overwhelming without the right information. This guide will walk you through what to do and what to expect.
Understanding Your Situation
Before diving into refinancing, it’s crucial to understand your current mortgage situation. Ask yourself the following questions:
Was your spouse the only one on the mortgage or title?
Are you a co-borrower, co-signer, or not listed at all?
Was there life insurance in place to cover the mortgage?
The answers to these questions will determine your options. If you were a co-borrower, you can generally assume the mortgage. If you weren’t on the mortgage or title, the process may require more legal steps.
Step 1: Contact the Mortgage Lender
Your first move should be to inform the mortgage lender of your spouse’s death. Provide a copy of the death certificate and ask for information about the current loan, outstanding balance, and any due payments. If you’re not already on the loan, ask about the lender’s assumption process.
If you're having trouble making payments during this transition, ask if the lender offers any hardship programs or deferrals.
Step 2: Determine Ownership and Title Status
You can only refinance a home you legally own. If you weren't on the title, you'll need to go through probate or provide legal documentation that gives you ownership rights. If the home was held in joint tenancy with right of survivorship, it typically passes directly to you.
If probate is required, the refinancing process can take longer, as lenders generally won’t approve a refinance until the title is in your name.
Step 3: Assess Your Financial Readiness
Refinancing means applying for a new mortgage, so your financial profile will be scrutinized. Lenders will review:
Your income and employment status
Your credit score
Your debt-to-income ratio
The home’s current market value
If your spouse was the primary breadwinner, you might face challenges qualifying for a mortgage on your own. In some cases, lenders may consider survivor benefits or other income sources.
A mortgage broker can be especially helpful here. They can help you understand your borrowing power and compare rates from multiple lenders.
Step 4: Explore Your Refinance Options
There are several ways you might refinance the mortgage:
Rate-and-term refinance: You keep the same loan amount but change the interest rate or loan term.
Cash-out refinance: You refinance for more than you owe and take the difference in cash. This might help pay for funeral costs, legal fees, or other pressing expenses.
Assumption refinance: If the lender allows it, you may be able to assume the existing mortgage under your name, particularly if the rate is favorable.
Step 5: Budget for Closing Costs and Fees
Refinancing typically comes with closing costs, usually between 2% to 5% of the loan amount. These costs may include:
Legal fees
Appraisal costs
Title insurance
Mortgage registration fees
Ask the lender if they offer a "no-closing-cost refinance" where fees are rolled into the loan balance.
Step 6: Consider Government Assistance or Insurance
Depending on your situation, you may be eligible for financial help:
CMHC Mortgage Default Insurance: If your mortgage was CMHC-insured, reach out to them for support options.
Life insurance payout: If your spouse had mortgage life insurance, it may cover all or part of the remaining balance.
CPP Survivor Benefits (Canada): You may be eligible for monthly benefits if your spouse paid into the Canada Pension Plan.
Step 7: Prepare and Apply
Once you have your documents ready—including proof of income, ID, death certificate, and title documentation—you can begin the refinance application. The process generally includes:
Application
Appraisal
Underwriting
Approval and closing
The timeline can vary, but expect it to take anywhere from 30 to 60 days.
Emotional and Practical Support
Handling finances after a spouse’s death can be draining. Don’t be afraid to lean on professionals:
A real estate lawyer can help with title transfers and probate.
A financial advisor can help plan for the future.
A grief counselor or support group can offer emotional support.
Final Thoughts
Refinancing your mortgage after the death of a spouse is a complex process, but it’s also a step toward regaining stability. With preparation and the right guidance, you can make informed decisions that protect your financial well-being and help you move forward during a difficult time.
You’re not alone. Reach out to professionals, ask questions, and give yourself grace as you navigate this new chapter.
