Selling Inherited Property With A Mortgage


Posted December 9, 2016 by jcncunsi

Inheriting a property with a mortgage can impose a financial burden on the beneficiary.

 
What Happens When I Inherit A Property With A Mortgage?

Inheriting a property with a mortgage can impose a financial burden on the beneficiary. So, what happens when you inherit a property with a mortgage? Here's a quick guide on what to expect and what to do if you've inherited a property with a mortgage.

Inheriting A Property With A Mortgage

Just like a property that is free and clear of any loans, a mortgaged property can be inherited as well. If you're the inheritor, make sure you have ownership by recording the deed at the county recorder's office. Failing to check if the property is insured is often a missed process an inheritor should take. Calling the insurance company to make sure your property has a homeowner's or landlord's policy on it is important. You should also call a title company to make sure the property has title insurance.

Be sure to note the mortgage doesn't just go away! You should consult with the mortgage company about how to pay it off.

What Happens To The Mortgage Or Liens When You Inherit Property?

Inheriting can sometimes be a financial burden. The mortgage, back taxes, liens, etc... do not just go away when a person passes. They follow the property and survive the death of the owner. Some liens may or may not be negotiable. Consult with a professional to help you with these matters.

Sometimes, these mortgages cannot just be assumed (For example, on properties with more than 5 units, apartment buildings, or commercial buildings). The Due-On-Sale clause prevents this. This basically means that the full balance of the mortgage is due upon the transfer or sale of the property. The Garn-St. Germain Depository Institutions Act of 1982 allows an exception to the Due-On-Sale clause when a property transfers by inheritance to a close relative. Also, a joint-tenant may assume a mortgage. A joint-tenant is a type of shared ownership of property, where each owner has an undivided interest in the property. This type of ownership creates a right of survivor-ship, which means that when one owner dies, the other owners absorb the deceased owner's interest.

What Happens When I Inherit A Property With A Mortgage Or Liens?

Reverse Mortgages:

If the property as a reverse mortgage, (where the lender pays the owner for their equity usually monthly) then the estate must pay the lender back. If the property passes to a beneficiary, then the beneficiary must pay back the amount to retain ownership. The beneficiary also can sell the property to satisfy the amount owed. They may also obtain a new loan to pay the amount owed.

Foreclosure:

The lender may foreclose on a property if the new owner fails to pay the mortgage. A lender might foreclose if the new owner doesn't meet the credit guidelines, and also may have a strong incentive to foreclose if interest rates are rising.
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Issued By probate
Country United States
Categories Business
Last Updated December 9, 2016