Many Kansas families worry about what will happen to the mortgage on a home after a loved one passes away. A common concern is whether the bank can call the loan due immediately under the “due-on-sale” clause. Fortunately, federal law provides important protections that can give heirs time and flexibility.

What is a Due-on-Sale Clause?

Most mortgages include a “due-on-sale” clause. This clause allows the lender to demand full repayment of the loan if the property is transferred to someone else. For example, if you sell your home, the lender can require the entire balance to be paid right away rather than allowing the buyer to assume the loan.

How Death Impacts the Clause

When someone dies, ownership of their home typically transfers to heirs through a will, trust, or the probate process. Technically, this transfer could trigger the due-on-sale clause, which worries many families.

However, there’s good news: federal law protects families in these situations.

The Garn-St. Germain Act: Federal Protection

The Garn-St. Germain Depository Institutions Act of 1982 limits when lenders can enforce a due-on-sale clause. Under this law, lenders cannot enforce the clause when a property is transferred due to the death of the borrower to:

• A surviving spouse
• A child or other relative
• A joint tenant who already owned part of the property
• A living trust (if the borrower was a beneficiary)

This means heirs generally do not have to pay off the mortgage immediately after a loved one’s death. Instead, they can step in and continue making regular payments.

What Heirs Should Know

Even though the lender cannot demand immediate repayment, heirs still need to:

• Keep payments current – Falling behind could still lead to foreclosure. Once the loan becomes 120 days past due the lender can begin the foreclosure process.
• Communicate with the lender – Notify the bank of the borrower’s death and provide documentation (such as a death certificate or letters of administration).
• Decide long-term plans – Heirs may choose to keep the property, refinance the loan, or sell the home.

Why Planning Ahead Matters

While federal law offers protection, estate planning can make the process much smoother. A well-drafted estate plan—such as using a revocable living trust or naming beneficiaries—can help avoid probate and ensure your loved ones can transition into homeownership with fewer complications.

Final Thoughts

Due-on-sale clauses can sound intimidating, but federal law protects families when property transfers occur because of death. With proper estate planning, you can ensure your loved ones not only inherit your home but also the peace of mind that comes with knowing the mortgage won’t suddenly become due.

If you have questions about estate planning or how to protect your family’s home, our team at Minter & Pollak, LC is here to help. Call us at (316) 265-0797 or click here to schedule your free estate planning consultation.

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