The Afterlife of a Home Mortgage Loan

You can tell how old someone is by the personal finance platitudes that resonate the most with them. Generation X still seem to believe that anyone can achieve their financial goals by forgoing their stop at the bougie coffee shop on the way to work, not that Generation X uses the word bougie, and instead drinking one cup of coffee at home and then another from the stale pot of coffee in the break room at work. The personal finance aphorism that Generation Z hears on an endless loop is that you will never own a house unless you inherit one. Inheriting a house can be a giant leap toward financial stability; when homeowners leave the family home to their children or other family members in their will, they achieve the goal of creating generational wealth. Not everyone can afford to leave a paid off house as part of their estate, though. A house encumbered by a mortgage loan is still a valuable inheritance, though. If you have inherited a house where the previous owner still owed a balance on the mortgage when he or she died, contact a Dade City probate lawyer.

Keep, Refinance, or Sell?

Inheriting a house with a mortgage is simpler than it seems. When the heir inherits the house, he or she can also inherit the mortgage. When the heir shows the death certificate, will, and other documents indicating that the previous owner has died and that the previous owner meant for the house to pass to the heir, the heir can take over the mortgage where the decedent left off. It is not necessary for the heir to refinance the mortgage. This is a win for the heir if the decedent borrowed the mortgage on more favorable terms than those available for mortgage being issued at the time the heir inherits the mortgage. To ensure a smooth transition, the estate must continue making mortgage payments during probate.

This is not how the inheritance of a mortgage-encumbered house always goes, though. Sometimes the heir who inherits the house refinances the mortgage after the estate settles. This is a more likely scenario if interest rates are lower when the estate settles than they were when the decedent borrowed the mortgage.

In some cases, it is obvious that the heirs will not be able to afford to assume responsibility for the mortgage, with or without a refinance. When this happens, the estate may simply surrender possession of the house to the mortgage lender, to avoid foreclosure. Likewise, the estate might sell the house to settle claims by other creditor claims and then distribute the remaining proceeds of the sale to the beneficiaries of the will. There are also cases where the heirs choose to sell the house, simply because they would rather inherit money than real estate.

Contact a Florida Estate Planning Attorney About Mortgage-Encumbered Houses in Probate

A probate attorney can help you prepare to inherit a house where the decedent still owed money on the mortgage loan.  Contact The Law Office of Laurie R. Chane in Dade City, Florida to discuss your case.

Source:

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