Monday, February 3, 2020 / by Angela Hunter
What Happens if you Inherited a House with a Mortgage?
So you’ve inherited a house with a mortgage and wonder what’s next:
When a homeowner dies before the mortgage is paid off, the debt survives she. It must be paid off by the estate, assumed by another person, refinanced or paid off by the person inheriting it. The details can be complex. But, they don’t have to be.
Check them out below:
Assets, Debt and Death
When someone you love dies, the death can leave a huge hole in your life. But life goes on and the deceased person’s assets and debts don't disappear with them.
If your loved one owned a home and owed a mortgage debt, you may inherit one or both.
In any event, both must be addressed in probate by the executor and the court. Probate is a court-supervised process to deal with the estates of deceased persons.
Estates include all assets and all debts of the person, and the first job of the person in charge, termed the executor, is to find the assets and identify the debts of the deceased. Debts must be paid out of estate assets before the remaining assets are transferred to the beneficiaries named in the will or, if the deceased died without a will, to next of kin according to state intestate law.
Inherited a House with a Mortgage
If the deceased left a house with a mortgage and you inherit the house, you may or may not inherit the mortgage too.
If the deceased had lots of liquid assets, like cash or stocks, she may have specified in her will that you inherit the house free and clear of the mortgage. In this case, the executor must use liquid assets to pay off the mortgage, then transfer the property deed to you free of liens and encumbrances. Sometimes the deceased has no other significant assets than the mortgaged house. Or she specifies that you take it with the mortgage. In either of these two circumstances, you take title to the house and must deal with the mortgage debt.
If the mortgage debt is in an amount that exceeds the value of the property, you may want to consider opting out of the bequest. Ask the Executor for the proper forms.
If the deceased’s mortgage loan has this clause, you may receive a notice of intent to foreclose when you inherit the property. Speak with your attorney because there are inherited property loopholes for the due on sale clause.
Laws Around Assuming the Mortgage Loan
The lender must allow an inheriting relative to assume the loan in certain cases.
This is not a simple law to understand and the details of application vary by state. You’ll probably want to see an attorney if you wish to assume a loan under this law.
Another recent rule may assist you in assuming the loan as well. In 2018, the Consumer Financial Protection Bureau enacted a rule protecting family members who inherit a home with a mortgage. The loan companies are required to identify and work with successors. Successors get the same federal protections that the original borrower had.
This includes the right to be fully informed about the account. It also includes the right to apply for a loan modification to the same extent the original borrower could.
Assuming the Loan
Other Options When Inheriting a Home with a Mortgage
If time or patience isn’t on your side, then you may consider a CASH OFFER.
Here, on the Sells Strong Team, we can get you a Keller Offer “Cash Offer” within 72hrs and close as fast as 17 days. You don’t have to worry about updating the property, showing appointments, making repairs, etc. If you feel this would be a good option for you, please contact us for your Free, No-Obligation, Cash Offer at: SellsStrongBroker@gmail.com or 770-744-1344