Riddle me this....un-assumable mortgage

[notnksnemor]

Scenario -Parents have a low interest un-assumable mortgage on their residence. Not a large loan.
1 living child.
If both parents pass, does the living child have the right to inheritance of the loan and property or even to pay it off? Or does the mortgage company have 1st dibs?

 

[westcobbdog]

Scenario -Parents have a low interest un-assumable mortgage on their residence. Not a large loan.
1 living child.
If both parents pass, does the living child have the right to inheritance of the loan and property or even to pay it off? Or does the mortgage company have 1st dibs?

Not unless it's a non qualifying assumable loan. Not too many of those around today but I occasionally see them. If the home is in a metro county I can help you analyze its retail value vs the payoff. Also can refer you to a few diff experienced mortgage lenders, one a mtg banker who lends his companies monies the other a mortgage broker who has diff loan options, they lend other peoples monies.

 

[Oldstick]

I am not any kind of authority on this so take with a grain of salt. But from my limited dealings with estate planning, I think that any real estate has to go to a probate judge for ruling in GA, even if the last parent has a will.

So my uneducated guess is that a judge would either rule that the survivor may assume the mortgage, if allowed by law, or else they would rule that the survivor has x amount of time to pay-off the mortgage and become the owner.

 

[GeorgiaBob]

If by will, probate, or provision in the deed the property transfers to you then you can take ownership and record your ownership with the county. That does NOT eliminate the indebtedness nor does it invalidate the lien held by the mortgage company. If the mortgage is not assumable then you will have to pay it off. The mortgage company does have the right to foreclose and take the property if you fail to pay them.

In the real world, you have a lot of options. The original lender might be willing to set you up with a new mortgage in your name, at current loan rates. You could borrow from another lender and pay off that debt. One option would be to offer the lender a repayment schedule without making a new loan. The original mortgage would be in default but that won't affect you credit. If the lender agrees (get it in writing) to accept payments, be very careful to keep track of what you pay and how they apply the funds!

 

[notnksnemor]

If by will, probate, or provision in the deed the property transfers to you then you can take ownership and record your ownership with the county. That does NOT eliminate the indebtedness nor does it invalidate the lien held by the mortgage company. If the mortgage is not assumable then you will have to pay it off. The mortgage company does have the right to foreclose and take the property if you fail to pay them.

In the real world, you have a lot of options. The original lender might be willing to set you up with a new mortgage in your name, at current loan rates. You could borrow from another lender and pay off that debt. One option would be to offer the lender a repayment schedule without making a new loan. The original mortgage would be in default but that won't affect you credit. If the lender agrees (get it in writing) to accept payments, be very careful to keep track of what you pay and how they apply the funds!

Thanks.
There are ample funds in the investments they will inherit to pay off the mortgage, I was wondering if they would be given the chance at pay off.

 

[JustUs4All]

The ownership of the property and the liability for the loan on the property (mortgage) are two totally separate issues.

The ownership will be determined by the probating of a will or the law of the state if the person died without a will.

The liability for the loan on the property will transfer with the property to the person who inherits it. The language in the loan agreement will dictate what options the new owner will have. If the mortgage is not assumable then likely the death will cause the loan to become due and payable. IF this is true, @GeorgiaBob has given some good advice on how to approach the lender.

 

[Lukikus2]

Was this basically a reverse mortgage?

 

[notnksnemor]

Was this basically a reverse mortgage?

No.
A normal re-finance at a 2.5% rate several years ago.

 

[Ruger#3]

I’m not well versed in this but will share what was recommended to me. An attorney drafted a document registered with the county on who gets ownership of the home upon my death. This keeps it out of the probate process.

 

[westcobbdog]

I am not any kind of authority on this so take with a grain of salt. But from my limited dealings with estate planning, I think that any real estate has to go to a probate judge for ruling in GA, even if the last parent has a will.

So my uneducated guess is that a judge would either rule that the survivor may assume the mortgage, if allowed by law, or else they would rule that the survivor has x amount of time to pay-off the mortgage and become the owner.

No sir, a probate judge can't determine if a loan is assumable or not.

 

[Oldstick]

No sir, a probate judge can't determine if a loan is assumable or not.

I assume any judge know the laws as I stated above. And would rule accordingly.

But if the loan is still in good standing when the owner passes, an heir could certainly get the probate judge to allow the heir to payoff the mortgage in one swoop right? If this is not correct then something is wrong with our laws.

JustUsforAll and Georgia Bob seem to have the most knowledge on this subject as seen above.

 

[westcobbdog]

I assume any judge know the laws as I stated above. And would rule accordingly.

But if the loan is not already in default status when the owner passes, an heir could certainly get the probate judge to allow the heir to payoff the mortgage in one swoop right? If this is not correct then something is wrong with our laws.

JustUsforAll and Georgia Bob seem to have the most knowledge on this subject as seen above.

Stick, I dont think an heir would need permission from a judge to pay off a mtg. I recently helped a member on this site sell a home for which he was executor. He had to make mtg and car insurance plus other payments while the estate was slowly being probated, but was told he couldn't do much else until the estate was probated and given the all clear clear, he was told couldn't even clean the place up.

 

[notnksnemor]

I just wanted to make sure my heir would be able to keep up the loan payments until they receive the insurance and investment pay outs. Then just pay the loan off.
I think y'all have said yes.

 

[slow motion]

My step Mom had me placed on her checking account in case she became incapacitated and needed me to pay her bills. At her death I still had access to those funds as a co-owner of the account. Might be helpful if there is a concern over the ability to maintain the payments until will is probated. Might seek advice of a real estate or estate lawyer. I'll pm you a member I think might fit one of those.

 

[LTZ25]

Those are some good answers !!! I don't know much but I have not seen anything about an assumable mortgage in many years . You used to be able to buy a house with a A M and just pay owner his equity .

 

[MudDucker]

Scenario -Parents have a low interest un-assumable mortgage on their residence. Not a large loan.
1 living child.
If both parents pass, does the living child have the right to inheritance of the loan and property or even to pay it off? Or does the mortgage company have 1st dibs?

Depends on the security deed, but I've had clients who left the house title in the estate and just kept on paying and never got called.

I've also had a couple that the mortgage company watched obits like a hawk and called the loan within 90 days of death.

 

[MudDucker]

I just wanted to make sure my heir would be able to keep up the loan payments until they receive the insurance and investment pay outs. Then just pay the loan off.
I think y'all have said yes.

The quickest I've ever seen a mortgage called was 90 days. Most take longer unless you miss a payment.

 

[MudDucker]

First, heirs will have always have an oppurtunity to pay off the loan. Mortgage holder has to go through foreclosure proceeding to take the property and that takes about 90 days usually and that happens only after they send a demand letter.

Second, you inherit property subject to the mortgage, you don't inherit the debt. However, to keep the property you have to keep paying the debt or be ready to pay it off when the mortgage holder begins foreclosure.

Third, most mortgage holders don't want the property, they want the money. It is VERY rare that a mortgage company even knows of somone's death and they have little reason to check as long as payments are made. If your heir has access to the same account you were making the payment from and they continue to make it from that account, there is little to trigger the mortgage company.

Forth, there are VERY few assumable loans. Most have a due on transfer and due on death clause.

You can avoid probate with a deed that gives your heir/beneficiary the rights upon your death (survivorship deed), but that also ties you up during your lifetime as they must consent to any sale or remortgage. Better to use a revocable trust and get mortgage company approval to transfer to trust. Check first, but most will allow it. They will require you to sign a personal guaranty of the loan usually, but you are already personally liable.

I am an estate/tax attorney, but these statements are for educational purpose and do not constitute legal advise to anyone.