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Virginia Probate – Do I have to Refinance the House When the Owner Dies?

Virginia Probate – Do I have to Refinance the House When the Owner Dies?

By Attorney Jennifer Kahl, July 9, 2019

If you have inherited real estate from a person who died, you may be wondering if you have to refinance the mortgage. Often, the mortgager will lead you to believe that you must. However, this is not usually the case.

The “due on transfer clause”

Most mortgages have a rule that, if the property transfers to a new owner, the entire mortgage is due at the time of transfer. This is called the “due on transfer clause.” For the most part, it makes sense. We all know that if you sell your home, you must pay off your mortgage in full. When a person dies, the property transfers to the decedent’s heirs, either by devise in a Will or by the rules of intestacy. Does this transfer trigger the due on transfer clause?

The Germain Act

The Garn-St Germain Depository Institutions Act 12 U.S. Code § 1701j-3 (“The Germain Act”) protects certain people from the due on transfer clause. This is federal law that applies to all states. Specifically, it says that a mortgager can not enforce a due on transfer clause if:

  • The transfer is the result of the death of a joint tenant or tenant by the entirety; or
  • The transfer is to a “relative” as the result of the death of the borrower; or
  • The transfer is to the spouse or children of the borrower.

(There are other exceptions, but these are the exceptions that usually apply when the borrower dies). 

Do you need to refinance?

If you inherited the property from the decedent because you owned the property jointly with that person, you do not need to refinance. Similarly, if you inherit the property from a relative who dies, you do not need to refinance. Unfortunately, mortgage companies often pressure new owners to refinance. Sometimes they will incorrectly state or imply that the new owner must refinance. Usually, this is not true. New owners should be aware of their rights and stand their ground. If the mortgager continues to insist upon refinance, the new owner should seek qualified legal counsel.

Heritage Law


With over thirty years of combined experience, we proudly serve the Virginia Peninsula, the Middle Peninsula, and Williamsburg. Our goal is to protect the personal and financial relationships that support your family. This includes preparation for times when you may be incapacitated and making arrangements for your family in the event of your death.