What should be done if a co-borrower passes away?

What happens to home loan repayments if a co-borrower passes away, and what steps must be taken? Let’s find out.

How does the death of a co-borrower affect home loan repayments?

Initially, the death of a co-borrower does not affect the active home loan agreement. The loan contract with the bank remains valid and is not terminated by the death of one or both co-borrowers; the status of each co-borrower remains unchanged from before the death occurred.

Changes to the loan details occur once the bank is notified of the co-borrower's death. The bank will then require the deceased's heirs or estate administrator to sign a document acknowledging the debt obligation within one year.

Acknowledging the debt creates a binding obligation for the deceased co-borrower's heirs, effectively making the heir who accepts the debt a debtor to the bank in place of the deceased co-borrower. A key limitation here is that any heir accepting the debt must be of legal age.

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How does the death of a co-borrower affect home ownership?

Home ownership will also change. Since the loan was taken out jointly, ownership was originally shared equally between the co-borrowers; therefore, upon the death of one co-borrower, their half-share of the ownership passes to their heirs.

This process requires action at the Land Office in the district where the property is located. The heirs and the estate administrator must submit a request to change the name listed on the back of the title deed from that of the deceased co-borrower to their own names. This process incurs a transfer fee of 2% of the appraised value.

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5 Scenarios Involving the Death of a Co-Borrower
There are several important scenarios to consider regarding continued home loan repayments after the death of one co-borrower:

1. The deceased co-borrower held an MRTA policy
MRTA (Mortgage Reducing Term Assurance) is a type of credit life insurance that borrowers or co-borrowers can purchase through the lending bank. It provides coverage in the event of the insured's death or permanent disability.
The policy settles the home loan debt up to the insured coverage limit. Therefore, if the deceased co-borrower held an MRTA policy, the insurance payout is used to settle the debt within that coverage limit.

For example, if the home loan amount is 2 million baht with two co-borrowers, each is responsible for 1 million baht of the debt.
If the deceased co-borrower held an MRTA policy with 600,000 baht in coverage, that amount would be paid out upon their death to settle their portion of the debt. This leaves an outstanding balance of 400,000 baht for that co-borrower's share—an amount that the co-borrower's heirs may choose to acknowledge and continue paying.

2. Heirs of the co-borrower continue loan repayments
If the co-borrower's heirs express an intention to assume the debt, the amount they must repay jointly with the remaining co-borrower is half of the latest outstanding loan balance. In addition to the requirement that the heirs assuming the debt must be of legal age... The bank will need to assess whether the remaining borrower has the capacity to service the debt—considering both their income and the total debt burden they can reasonably shoulder.

3. Scenario where the other co-borrower can continue making payments alone
If the surviving co-borrower has the financial capacity to cover both their own share of the loan and the share of the deceased co-borrower, they may simply continue making payments without any issue from the bank. However, a legal issue remains: ownership of half the house will still pass to the heirs of the deceased co-borrower.

4. If a co-borrower wishes to find a new co-borrower to take over repayments
A co-borrower may find a new co-borrower to assist with ongoing home loan repayments, provided the new co-borrower is a relative. The bank must be notified of the intent to change co-borrowers; the bank will then assess the new co-borrower's repayment capacity just as it would for a new loan application.
Generally, the debt-to-income ratio accepted by banks ranges from 40% to 60% of the borrower's income.

5. If unable to continue repayments independently and unable to find a new co-borrower
In this scenario, the bank will initially allow time for the co-borrower to find a replacement and may offer flexible repayment measures—such as a three-month interest-only payment period (e.g., the policy at Kasikornbank). However, if a new co-borrower still cannot be found:
The co-borrower must sell the property to a third party. This requires coordination with the executor of the deceased co-borrower's estate to obtain consent for the sale, as a single co-borrower cannot sell the property unilaterally. Ultimately, if the property cannot be sold and the debt cannot be serviced, the bank will deem the original co-borrower and the heirs of the deceased co-borrower to be in default.

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Thanks to DD Property for the useful information.