Ever wondered if it is possible to Mortgage loan Inheritance on the house? If you have, the answer is yes. A mortgage loan is used to purchase a home, estate, land, or property with payments to the lender in installments, with the property serving as collateral against defaulted payment.
What a Mortgage Loan Inheritance Entails
When a person with a mortgaged house dies before the loan has been fully cleared, the debt lives on. An heir or a beneficiary of the property belonging to the deceased is obligated to assume the mortgage and keep up with the payments or risk losing the house to the lender who can foreclose and still has the right to sell it to regain their part of the agreement.
But, it might not happen. Suppose the homeowner had many significant properties or objects of value, like stocks, cash, or other liquid assets. In that case, they might have taken necessary measures beforehand to make sure that the heir to the house does not inherit it with the loan by clearly providing alternative specifications in their will on how to pay off the mortgage upon their death. How does that work? Well, one or more of those other assets might be sold and used to pay off the mortgage.
However, if this isn’t the case, then the inheritor is automatically left with no choice but to decide on how best to handle the mortgage loan.
Weighing Your Options
It’s a nice thing to own a house of your own if you don’t already, and an inheritance provides such elating ownership and luxury. But even with that, you still need to decide what you want to do when it’s a mortgaged house and then weigh the options. There are some key questions you should ask yourself when considering your options with an inherited mortgaged property.
● Do you want to keep the house?
There are many reasons why a person wants to keep an inherited house, but there are also a few more reasons why some would not. If you decide to keep the house;
- You can find different means of paying off the mortgage loan, like using your funds or clearing it using some of your other valuable assets.
- You could just refinance the mortgage, using your name instead of the late owner, depending on your cash situation and what you want.
● Do you want to sell the house?
If you do not want to deal with all the additional payments that might arise or those you became aware of after the house is inherited, then decide on selling the home;
- You will need to make sure the deceased was up to date with the mortgage payments to avoid any problems. If not, you have to make payments or reach some agreement with the lender.
- You could consider opting out of the legacy. This is particularly deliberated when the property’s value is not up to the amount of debt owed, and a person does not want to go through the stress of handling all the house’s mortgage issues.
- Make sure you speak to an attorney who will advise you on the best course of action and not just work with assumptions.
As an inheritor of a mortgaged house, you should make sure you go through and understand the original terms and clauses of the agreement or contract between the deceased and their lender. This is important because there might be terms in the agreement, which may limit some of the choices and decisions you may want to make on the house.
For example, there’s something called a due-on-sale clause which can be found in a mortgage loan contract. It requires the homeowner to clear the whole loan balance before selling or transferring ownership of the property to another buyer. This helps lenders to prevent new buyers from assuming the mortgage loan at the previously agreed interest rate. This clause doesn’t usually apply to persons who inherit a property, but some lenders include them in the clause, so you might want to check to be sure.
It is possible to inherit a mortgage loan on an inherited house, but it is not always probable. Some federal laws are in place to help and protect some beneficiaries, heirs, and relatives who intend to assume the mortgage loan on their inherited house. But if you’re among those who decide not to keep the property, make sure you understand all there is to it and not base all your decisions on assumptions.