Inheriting a House with a Mortgage
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Loading... - Alexander Mfout
- 30 Aug 2022
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Dealing with the loss of a loved one is never easy. When inheritances, homes, estates, and mortgages are involved, tensions can run high within a family and it’s easy to get lost in the paperwork and terms.
Learn what your options are when you inherit a home with a mortgage.
KEY TAKEAWAYS
1. Notify the existing lender right away, and continue to make payments on the existing mortgage.
2. Depending on how the estate was set up and the state where you live, you may have to go through probate, which can take a long time if the estate is complex or if the will is contested.
3. If things get contentious, keep calm and seek professional help.
4. If you inherited the home with multiple people, you may have to buy the others out if you want to live in the home, or vice versa.
5. After the estate is settled, you can assume mortgage payments under the original loan terms, sell the home, or refinance under new loan terms.
What Happens in Probate
After your loved one passes, you may have to go through probate, depending on how they set up their estate and your state’s laws. This process essentially allows the will to be contested by heirs and allows creditors to make any claims against the estate.
Probate can be a lengthy process if the estate is particularly complex or if the will is contested. During this time, make sure that you or the executor of the estate contacts the lender to notify them of their loved one’s passing. The lender most likely will need a copy of the death certificate to be able to speak to you about the loan terms. It is very important that someone keeps making payments on the mortgage during this time, so that the property doesn’t go into foreclosure while you’re waiting on probate.
Family Matters to Consider
Depending on the circumstances of the will and everyone’s relationship with the deceased and each other, this can be a time of significant conflict. Make sure that you are doing your best to keep a level head during this time, giving yourself and the people around you time to grieve. If things get too contentious, legal representation may become necessary, but you should also consider seeking a professional mediator or counselor to help your family through this difficult time.
Multiple People Inheriting the Same Home with a Mortgage
In the case of multiple people inheriting a portion of the same home, things can get exceptionally messy. Assuming everyone who has inherited the home doesn’t want to all live in the home together, you’ll have to make some tough group decisions. The simplest is to sell the home, thereby paying off the mortgage, and splitting the proceeds evenly.
If some of you want to stay in the home and some of you don’t, the ones who want to remain in the home generally have to buy out the ones who do not. When the inherited home has a mortgage, the math can become a little more complicated. The simplest math would be to take the total value of the home as verified by an appraisal, subtract the existing mortgage balance, then divide by the number of heirs to get each heir’s buyout amount. Read More...
