What happens to mortgages when a bank fails?

Are assets from savings accounts and other deposits used to balance debts when a bank goes bankrupt? Or is mortgage debt written off when a bank shuts down? If a bank does not exist anymore, how can I make mortgage payments?

Greetings.

Mortgage debt remains even after the bank which holds the mortgage fails. When your bank goes bankrupt, your mortgage is sold to another bank or - if your contract allows for it - terminated ahead of schedule.

Whether your assets held at the failed bank can be used to cover your mortgage debt is not clearly regulated. Some mortgage contracts include a clause which specifically excludes the possibility of your assets being used to settle your debt.

That means that if you hold 60,000 francs in a savings account at a bank which goes bankrupt and the bank cannot pay your 60,000 francs back, you still won't be able to credit that amount to your mortgage.

If a mortgage contract includes this clause, you could try asking the bank to remove it before you mortgage your home or renew your mortgage contract.

Best regards from Moneyguru,
Bank failures: What happens to your money?