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I remember from the GFC that the USA has an unusual type of mortgage that isn't a continuing debt - the borrower/ home purchaser can just walk away from the house and the debt. It was one of the things that prompted all the problems. It only applied to some mortgage types. I think it would be a good idea to get legal advice. Take all the paperwork with you.
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So if I leave them life insurance money, will the bank go after them and force them to pay the balance or can they let the bank take the house back if they don't want it? I want to make sure they have some money after I'm gone.
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Tothill Jan 2019
If your life insurance policy lists your children as beneficiaries, the bank cannot go after them to pay off the mortgage. If your estate is the beneficiary, then any outstanding debts must be paid before any funds are distributed to your heirs.

if you have significant equity in the house, it makes more sense for the kids to sell it, pay off the mortgage, then split the remainder between them.
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bwatts001, glad you are thinking ahead on what to do. There are many ands, ifs, and buts here.

Example, if you find in your later years that you need Medicaid [which is different from Medicare], when you pass, Medicaid will put a lien on the house. So when the house sells, Medicaid will get some of the equity. But then there is the bank who also wants to get paid. So, this can become so complex.

Read the fine print on your mortgage papers. Hopefully there isn't a "due on death" clause. The heirs can take over the house and still make the mortgage payments. Or if they notice the interest rate on your loan is high, they can refinance the house. Or sell the house.

With the life insurance policy, would the amount be enough to cover the mortgage? You will need to check to see what Medicaid may or may not do regarding a life insurance policy. Again, so complex.

I would recommend making an appointment to see an "Elder Law Attorney" who can put all the ducks in a row for you, and recommend the required legal paperwork to make everything happen the way you want it.
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The mortgage company will either get its loan repaid in full, or it will get the house. That's how mortgages work. So your question should really be: will the life insurance policy payout be enough to cover the outstanding mortgage?

Your executor(s) is/are responsible for settling your debts. That person may or may not be one or more of your children. Have you made a will?
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Do you have a Will?

When you die your estate is responsible for settling your debts.

A mortgage is secured by the equity in the house. When you die the mortgage must still be paid. Unlike credit card debt which is not secured, and is ‘forgiven’ if there are no assets to pay it off.

if you have life insurance you can assign it in a couple ways to cover the outstanding balance on your mortgage. You can include the bank as a beneficiary, you can make your estate the beneficiary, or you can make your kids the beneficiary. Be aware that if the kids are the beneficiary of the life insurance, they are not compelled to use the funds to pay off the mortgage.
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