My mother guaranteed my brother’s mortgage. What happens if she dies?

Also, what happens if my mother and stepfather both pass away and my brother’s house is not paid off? What happens if one of them needs assisted care and the house needs to be sold for that? They are both in their mid 70s.

The Other Sibling

Dear Other Sibling,

The most obvious way to remove a lien from your parents’ house would be for your brother to pay this debt. He could refinance, if his financial situation improves; although he is unlikely to do that if he is locked in at a low interest rate and few could blame him for wanting to refinance when the 30-year rate is flirting with 8%. If they had simply signed as co-signers, they would be responsible for the loan as co-owners of this property. 

The property market has been tough in recent years: low inventory, high interest rates and rising prices. It’s a conundrum for many economists who repeatedly predict that sales will improve and interest rates will go down. Well, life gets in the way of that — unexpected events in addition to rising geopolitical tensions. Young people, in particular, are being hit hard by rising prices and rates; parents see their pain and, perhaps against their better judgment, want to help.

In a worst-case scenario, your brother defaults and your parents have to find the money to pay the loan or lose their house. Or your brother does not have the money to pay the mortgage, and your parents step in and pay the monthly obligation or your brother agrees to move in with your parents so they can rent the house out. The obligation does not necessarily die with the guarantor; if your parents were to die, it could complicate the probate of their estate.