When a relative passes away if they owned a home there can be a lot of questions about inheriting the home. What happens if you inherit the home? What about any remaining payments due on the current mortgage?
Inheriting a Home with a Mortgage
In many cases, if you are listed as a person to inherit the home in the will, or you are the heir next in line and automatically inherit, you will not only receive the home but the mortgage that is attached to it.
If you are in this situation, it is a good idea to employ the help of a real estate attorney that specializes in this area of law either in estate planning or working with retired Americans. It is a very good idea if there is more than one person set to inherit the estate such as siblings or more than one named person on the will. It is also a good idea if there is a property in multiple locations or a very large amount of money at stake.
Even though the person who signed the original mortgage paperwork and took on the home loan has passed away the remainder of the mortgage balance needs to be repaid. If you stand to inherit your property it is now your responsibility to decide how the repayment of this loan will be carried out.
It is not uncommon for people who inherit property to face late payments or discover that payments were not being made at all while you are getting details ironed out about the property. Once you know all the details about any money owed on the property you have a few options in moving forward.
Assuming the Mortgage
If you decide that you will live on the property it could be possible to assume the mortgage where you become the new borrower and continue to make payments just as the original borrower did.
One means that some people use to square away the mortgage on a property after someone passes is to refinance the property and pay off the old loan with a new one.
Sell the Property
In some cases, it could be the easiest option to sell the property and repay the loan with the proceeds from the sale. This is the most chosen path for properties that have more than one person in line to inherit. In some cases, if siblings all stand to inherit and one sibling would prefer to keep the home in the family, they look into the option of purchasing the home through a conventional mortgage that would pay off the remainder of the current mortgage and a lot the remaining proceeds to the other inheriting siblings.
The good news with inheriting a property that has a mortgage balance remaining is that the heir has significant leverage in dealing with a mortgage in an estate situation. There are certain measures in place to help protect anyone inheriting a property and help them to either assume the existing loan or find financing. In addition to the cost of the property, however, you want to make sure you’re well aware of any state taxes such as estate taxes and inheritance taxes.
For more information on real estate in San Tan Valley please contact us anytime.
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