No one likes to think about their own mortality, but in reality there is nothing definite in life. You can get into an accident or get sick, and you have to deal with the problems left behind after death. If you have a mortgage, you may be worried about what this means for your heirs and loved ones. Will they be able to support your home and who will pay for it?
Who takes over your mortgage when you die?
Just for this topic, the word “mortgage” is taken from the French term “death oath”. When you die, your mortgage does not suddenly disappear. Your mortgage lender still needs to get your money back, and they can foreclose your home if they don’t. The same applies if there are outstanding home equity loans or lines of credit attached to the property.
If you applied for a mortgage with co-borrower or the co-signer, the solution is relatively simple: the other party can continue to make payments on the loan.
If you do not have a co-borrower or co-owner, the responsibility lies with the executor of your property, who must continue to make payments using the funds of your property until the fate of the house is clarified.
If you leave your home and go to an heir, your heir can decide what to do with the house and mortgage. Generally speaking, your heir will need either take over a mortgage and start making payments, or negotiating the sale of the property.
What if you inherit a property?
if you are inherit property who has a mortgage, you will be responsible for the payments on that loan.
If you are the sole heir, you can go to a mortgage agent and ask to take a mortgage or sell the property. You can also allow the lender to foreclose.
If you want to take out a loan, you can ask the service staff to transfer a loan you. If you sell your property, you will have to spend the proceeds to pay off the loan before you can pocket any windfall income.
Some lenders are willing to be flexible if you do not have the financial position to take out a loan but do not want to sell. You may be able to refinance the loan to provide a lower payment, or change the terms to make it more affordable.
If multiple heirs inherit an interest in a home, things get more complicated. Each party will need to agree on what to do with the property, or, for example, one of the parties may need to buy out the shares of the others. It is best to enlist the help of an estate or real estate lawyer in situations like this.
Do you need retraining heirs?
Before a mortgage lender can approve a loan, borrowers usually need to meet the Repayment Ability requirements. These rules help protect borrowers from predatory loans that they cannot afford.
However, there is an exception to this rule if you inherited a home. The heirs do not need to re-qualify the mortgage for the inherited home. This enables them to keep the house and take out the loan without meeting the repayment requirements.
However, if you want to change the terms of your mortgage – for example, refinancing at a lower rate – you will need to apply for a new loan and meet all the lender’s requirements.
How to get a mortgage
You may be required to provide proof that you are the legal heir to the property or the executor of an inheritance if you are inheriting a home on a mortgage and want to take on a loan. Contact your mortgage lender or service provider for further steps and information, such as outstanding balances, monthly payments, and other important details.
You can usually work directly with a service agent to obtain a loan. Remember that you do not need to go through the underwriting process or re-qualify for a mortgage to accept it. You may want to hire a lawyer to help you communicate with the service staff, especially if the service staff is less than helpful in your situation.
After you have taken out a loan, you can continue to pay on it or choose to refinance.
If you have a home, it is important to plan for the future and what happens when you pass away. Having a clear last will and testament that outlines what to do with your mortgage loan, bank accounts and other assets will help your loved ones navigate what to do with your property. Good life insurance politics can also help relieve your heirs of financial stress. Take time to create real estate planeven if you don’t think you need it, and talk to your loved ones about your desires, including what you would like to see in your home.