Detailed Answer: How to take over your deceased parent’s mortgage in South Dakota
When a homeowner dies in South Dakota, the mortgage does not automatically disappear. The loan stays attached to the house until it is paid off, assumed by an heir with the lender’s approval, or refinanced. What you must do depends on how title to the home passes (will, intestacy, joint ownership, or trust) and on the lender’s terms. Below are the main legal and practical steps to take.
1. Figure out who owns the house now
- If the house was held in joint tenancy or as tenants by the entirety with right of survivorship, title likely passed automatically to the surviving owner(s) on death. You may need a death certificate to record the change with the county.
- If the decedent left a valid will, the house passes according to the will once the estate is administered through probate (or if the executor transfers title under the authority of the probate court).
- If there is no will (intestate), South Dakota’s probate and intestacy rules determine heirs and title. See South Dakota’s Uniform Probate Code (Title 29A) for the probate process: https://sdlegislature.gov/Statutes/Codified_Laws/Default.aspx?Title=29A
- If the house is in a living trust, the trustee follows the trust’s terms to transfer ownership.
2. Open probate or get legal authority to act if required
If title does not pass automatically, someone (usually the executor named in the will or an heir) must open probate so the court can appoint an executor or administrator and issue written authority (commonly called letters testamentary or letters of administration). That authority lets a person transfer property, pay debts, and handle the mortgage. South Dakota’s probate framework is in Title 29A: https://sdlegislature.gov/Statutes/Codified_Laws/Default.aspx?Title=29A
3. Contact the mortgage lender early
- Notify the lender of the death and provide a certified copy of the death certificate.
- Ask the lender for a current payoff statement and for the lender’s policies on assumption, loan modification, and refinancing for heirs.
- Keep paying the mortgage until the situation is resolved. Missed payments can trigger late fees or foreclosure even during probate.
4. Understand your options for keeping the house
- Remain in place and pay the mortgage. If you inherit the house, you can continue making payments. The loan stays secured by the property.
- Assume the loan. Some lenders allow an heir to assume the decedent’s mortgage (taking over the existing loan and interest rate). Lenders often require an assumption application and underwriting. They may charge an assumption fee.
- Refinance in your name. If you qualify for a new loan, refinance to remove the deceased borrower’s name and obtain terms you can manage.
- Sell the house. Proceeds can be used to pay off the mortgage; any surplus goes to the estate or heirs under probate rules.
5. Watch for lender rights under the loan contract and federal limits
Many mortgages include a due-on-sale clause that allows the lender to require immediate repayment if ownership changes. Federal law, however, limits a lender’s ability to accelerate a loan in some transfers upon a borrower’s death—particularly transfers to a relative who becomes owner by inheritance. For general federal guidance on this limitation, see 12 U.S.C. §1701j-3 (Garn–St. Germain Depository Institutions Act of 1982). Even so, lenders can require documentation and may insist on an assumption or refinancing in other circumstances, so talk with the lender and get any agreement in writing: https://www.govinfo.gov/content/pkg/USCODE-2018-title12/html/USCODE-2018-title12-chap14-subchapI-sec1701j-3.htm
6. Complete title transfer and record necessary documents
- If probate or trust formalities transfer title, record any executor deed, personal representative deed, or trustee deed with the county recorder.
- If the lender requires documentation (e.g., assumption agreement), record as needed and keep copies for estate records.
7. Consider taxes and estate administration tasks
- Determine whether estate assets will cover debts and taxes. The executor or administrator must follow South Dakota probate rules when paying creditors.
- If you sell or refinance, consult a tax advisor about capital gains or step-up in basis issues.
When to get legal help
If ownership disputes arise, the lender threatens foreclosure, or you don’t know how probate applies, consult a South Dakota probate or real estate attorney. An attorney can help open probate, obtain letters to act for the estate, negotiate with the lender, and prepare deeds or loan assumption documents.
Important statutory reference: For South Dakota probate procedures and appointment of personal representatives, review South Dakota Codified Laws, Title 29A (Uniform Probate Code): https://sdlegislature.gov/Statutes/Codified_Laws/Default.aspx?Title=29A
Disclaimer: I am not a lawyer. This is general information about South Dakota law only and is not legal advice. For advice about your specific situation, consult a licensed South Dakota attorney.
Helpful Hints
- Gather key documents: death certificate, will, mortgage statement, deed, loan paperwork, and policy information.
- Contact the lender quickly and ask for a written statement of options (assumption, payoff amount, refinance rules).
- Continue mortgage payments until you have a plan; stopping payments can trigger foreclosure even during probate.
- If title passed automatically (joint tenancy), record the death certificate at the county recorder to clear title.
- Keep good records of all communications with lenders and any estate transactions.
- Check whether the loan is assumable or requires lender approval; assumptions commonly need credit checks and underwriting.
- Consider short-term bridge financing or a modification if you need time to sort out probate or finances.
- Speak with a South Dakota probate or real estate attorney if the estate’s assets are insufficient to pay debts, or if multiple heirs disagree about keeping or selling the property.