Death and Mortgage
Provided by HG.org
Mortgages are the standard in obtaining financing or refinancing a home for repair, initial purchase and remodeling. It is not often that the usual homeowner as the funds to complete these transactions without financial assistance.
This is most often accomplished through a lending institution such as a bank or mortgage agency. However, in some rare occasions, the homeowner dies before the mortgage is paid off. When this transpires, it is important to know what to do, who is responsible for the payments and how to proceed. While it is best to research the matter, a real estate lawyer may have the answered needed for these situations.
Because more United States citizens have a mortgage from the ages of 60 to 75 than most other age groups, it is important that the procedures change to encompass a solution to a problem of homeowners with mortgages dying before they may be paid off. It is especially crucial when there are no heirs or family members left to assist in paying the debt for a home. However, if someone inherits the house, he or she then inherits the loan. The transfer of the mortgage due to death is exempt from a lender demanding full payment immediately. The same interest rate and payments are applied to the new person. However, there are several other possibilities that may occur depending on certain factors.
When an heir exists to inherit the home, he or she may have several options open such as refinancing the loan. This could cause the interest rate and monthly payments to become lower. This is an enticing route for those that want to keep the house.
However, if this path is not possible, the original mortgage terms still apply. If the house is accompanied by an estate with funds to pay off the mortgage, it is possible that an heir may receive the property clear of any debts. This is usually provisioned in the will through a clause specifying that other items must be sold to retire the mortgage and clear the house from debts.
If the heirs cannot pay the monthly payments due to other financial obligations or due to hardships, the house may be sold. If the worst path is taken, the heir may walk away from the entire situation. However, leaving the scenario completely may be the best option if the mortgage is greater than the remaining value of the property, and there would still be debt remaining after the property has been purchased by a new owner.
When the payments cannot be made, and the bank or other lending institution starts procedures to sell the house to another party, foreclosure usually occurs. This stage of selling the property may not complete, which could lead to complications for the owner, but generally, the house is sold to another party after the bank and seized it and either auctioned it or finalized another process. If there is an owner attached to the house at this point, he or she may be responsible for fees, credit problems and other difficulties. However, if the heir did not claim the house or if there were no heirs, this process may be what occurs after the previous owner dies.
In some cases, the person who dies took out a reverse mortgage. This is a lien on the property, and without another borrower attached to the house, the loan is due in full when the owner dies. At this point, the property may only be inherited if the lien may be paid off completely without selling the home. This means the full balance due must be paid with cash either from the estate or with another source of funds. However, the most likely outcome of this is that the house is sold, the other forms of money are inherited by the heir and the loans, liens and other debts are paid through the sale.
Seizure of the house is the most likely action after the owner dies. This is to pay for other debts, the mortgage or similar matters. If there are many other items unpaid, the house may be taken to ensure these bills are provided funds. Because of this or other possible processes, it is important to seek the assistance and advice of a lawyer. A real estate lawyer may have the information necessary to determine what path to take and how much is on the estate. If other processes need to be initiated to sell or obtain the house and pay off a debt, he or she may assist throughout.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.