What To Do With A Inherited Mortgaged Property
Losing a parent is painful. Grieving for the loss might be a difficult process, especially when the death is too sudden or sooner than expected. Acceptance might take time and might require strong will from the grieving family, however emotional support from close friends and family is a big factor to help the person to move on.
Some parents plan ahead and write a will to hand down the home to their son or daughter. While this is a good thing, it becomes an immediate concern when the mortgage hasn’t been paid in full. “For inheritors of mortgaged properties, typical issues to address include taking the property’s title and recording the deed to establish actual ownership. Mortgaged property inheritors generally need to make arrangements with the lenders to pay off those mortgages,” this is according to a recent article by SFGate.
Even without a will, chidren have the right to assume ownership due to the nature of the relationship. However, many mortgages come in with a ‘due on sale’ clause that allows the lender to demand full payment of the outstanding loan balance before it can be fully transferred.
But there is a long standing federal law, the Garn-St. Germain Depository Institutions Act of 1982, which allows an exception to the ‘due on sale’ clause when the house is transferred by inheritance. With the existence of this law, a close relative can assume the mortgage payments and retain property ownership. “In practice, lenders often allow anyone capable of making payments to keep the property and simply assume the mortgage,” says Tom Streissguth from LegalZoom.
What Options Does The Inheritor Have?
The course of transfer of property ownership depends on two parties: the inheritor and the lender. If both parties agree to keep the mortgage repayment plan as-is, then there isn’t much of an issue. However, if one of the involved party is against the transfer, this may become a long and exhausting procedure, which could involve legal actions.
When the lender enforces the ‘due on sale’ clause. There are lenders who are strict on their mortgage policy and would demand full payment before handing down the property to the inheritor. According to James Hirby:
“When you inherit a home attached to a mortgage that has not been paid in full, you’ll have to confront some tricky legal issues. Unless you sign the home loan’s promissory note, you won’t be considered the primary mortgage holder. Your new home’s mortgage issuer may argue that the loan was intended only for the deceased borrower. If you’re unable to pay off the loan upon receipt of the property, they may demand that you refinance it. If you have mediocre or poor credit, the loan’s effective rate may increase substantially during the refinancing process.”
When the Inheritor Doesn’t Want the Property
Even a ‘free’ home can come with baggage. It may come in the shape of a lien, unpaid property taxes, or past due mortgage. These financial liabilities can become a nightmare for the new owner, and refusing to assume ownership may seem to be more logical and practical. Some would prefer the “buy my house for cash” option, in the hopes that it would be less of a hassle, basically a faster, easier route.
In situations like this Sell Any House can provide practical and time-saving solutions. We have been in the real estate business for ten years, assisting homeowners get rid of a house they do not need. Our methods are proven to be fast and simple, almost always completing transactions in as quick as 5 days.
If this is the kind of situation you are struggling with, then you have come to the right place. Contact us today to talk to an experienced real estate consultants on board our team! Feel free to visit www.sellanyhouse.com anytime for more information.