inherited house with mortgage

[earlierme]

My mom's house still has mortgage.

My sibling and I will inherit my mom's estate when she passes.

What happens to the mortgage if my mom dies?

What should I do if I decided I want to live in the house?

 

[obsessed]

I would think that the estate would have to pay off the mortgage and that you could not assume the mortgage. For example, if that is the only asset in the estate, you would have to purchase the house from the estate (with credit for you share of the net estate). The estate would settle the mortgage with the proceeds from the sale.

 

[COcheesehead]

It’s a debt like any other estate debt and will have to be settled, possibly by selling the house.

 

[SnowballCamper]

First, watch the video in this thread. It is excellent. PSA: Wills vs Trusts

Assuming the estate is split equally, you'd have to buy out your sibling's share, or negotiate with him/her.
The bank will likely get their money back first.

 

[pb4uski]

My mom's house still has mortgage.

My sibling and I will inherit my mom's estate when she passes.

What happens to the mortgage if my mom dies?

What should I do if I decided I want to live in the house?

Mortgage stays with the house. You and your sibling we could either pay off the mortgage or continue to make the mortgage payments. If you sell then the lender gets paid off at closing. If you want to live there you can but the mortgage payments still need to be made or the lender will foreclose.

 

[Original Wally]

Mortgage stays with the house. You and your sibling we could either pay off the mortgage or continue to make the mortgage payments. If you sell then the lender gets paid off at closing. If you want to live there you can but the mortgage payments still need to be made or the lender will foreclose.

Depends on whether it was a conventional (generally NOT assumable) or FHA, VA <- generally ARE assumable.

 

[engineernerd]

pb4uski is correct. The Garn-St. Germain Act of 1982 prohibited mortgage lenders from enforcing due-on-sale clauses in specific circumstances, including "a transfer to a relative resulting from the death of a borrower."

Link to the relevant text per the Cornell University Law School:

12 U.S. Code § 1701j-3 - Preemption of due-on-sale prohibitions

www.law.cornell.edu

 

[Texas Proud]

You can always leave it in your mom's estate and have it make the payments...

But as others have said, the debt does not die when she does...

 

[old medic]

I can tell you what happened for us.... Family friend had a free and clear house, but got a second mortgage when his wife had a stroke. After she passed he started losing his mind and went to a nursing home and his grandkids moved in. After he passed the grandkids quit paying the mortgage and the bank took it. It sat empty and trashed for 12 years before we rescued it at auction for $6500.

 

[engineernerd]

^^^ Wow. The bank kept it sitting empty for 12 years? Was it because of all the incompetence and failed recordkeeping I read about during the mortgage crisis? And how did you find out it was being auctioned?

 

[pb4uski]

^^^ Wow. The bank kept it sitting empty for 12 years? Was it because of all the incompetence and failed recordkeeping I read about during the mortgage crisis? And how did you find out it was being auctioned?

My guess is that the collateral was worth so little that it ws low priority to the lender... they probably had bigger fish to fry.

 

[engineernerd]

My guess is that the collateral was worth so little that it ws low priority to the lender... they probably had bigger fish to fry.

Yeah, but liability exposure would be a real issue and insuring a vacant home is difficult (for us ordinary mortals at any rate).

 

[earlierme]

Mortgage stays with the house. You and your sibling we could either pay off the mortgage or continue to make the mortgage payments. If you sell then the lender gets paid off at closing. If you want to live there you can but the mortgage payments still need to be made or the lender will foreclose.

I am trying to figure what is the "easiest" to approach so that I can live in the house.

I am thinking use mom's estate to pay off the mortgage. Not sure how to do this.
Once that is done, get appraisal of the house.
Split the assets of the estate including the house 50-50 with my sibling.
Transfer the house to my name.

Do we need a lawyer to do this?

 

[pb4uski]

Yes, you'll need a lawyer.

What is the mortgage interest rate? If it is low enough you might consider assuming the mortgage and just buy your half of the home equity from your sibling.

If you live in a state that allows enhanced life estate deeds or TOD deeds you might shift to one of those with you and you sibling as remaindermen or beneficiariesso you don't have to go through probate.

Just generally, anything you can do now in terms of structuring her assets so you can avoid probate later it'll be good.

 

[earlierme]

Yes, you'll need a lawyer.

What is the mortgage interest rate? If it is low enough you might consider assuming the mortgage and just buy your half of the home equity from your sibling.

If you live in a state that allows enhanced life estate deeds or TOD deeds you might shift to one of those with you and you sibling as remaindermen or beneficiariesso you don't have to go through probate.

Just generally, anything you can do now in terms of structuring her assets so you can probate later it'll be good.

Thank you.
I will contact the real estate lawyer that my mom used when she bought the house.

The interest rate is 7+% as I recall. House was purchased in 2023.

 

[old medic]

^^^ Wow. The bank kept it sitting empty for 12 years? Was it because of all the incompetence and failed recordkeeping I read about during the mortgage crisis? And how did you find out it was being auctioned?

No .... Methheads stripped everything of any value. We had been trying to buy it for several years before the auction.... Glad we waited...

 

[Markola]

Not saying this applies to anyone on the thread, but I’m convinced that leaving heirs a house to live in is probably doing no one any favors. Better to sell the asset and split the money.

We find ourselves surrounded on 3 sides by families who inherited their parents’ home and moved in. Only one of the three earns enough to keep up with maintenance, but two really don’t. They either do everything DIY, which looks like hell, or they ignore it completely. One no longer mows in the backyard and the other has a garage that is more holes than garage. The result is, our house will be less-desirable when we eventually sell. I built high fences. On the bright side, no one has barking dogs yet.

 

[engineernerd]

Sorry for your troubles, Markola! Funny I never thought about it before, but I bet a lot of families have the dynamic where there is a black sheep kid who all the other kids just want to keep out of crisis. So when Mom and/or Dad dies leaving a paid-off house behind, everyone thinks if we let ne'er-do-well John or Jane live there at least they won't be living on the street!