If a person inherits a piece of land or a home, do they get the mortgage that comes with it, or must it be paid before ownership is transferred? Generally speaking, the mortgage must stay with the property. Read on to learn more about mortgages and real estate inheritances.
A Good Executor Keeps Up With Mortgage Payments
While the land or home is in the trust or the estate, and before the title is transferred to the heir, the estate executor should continue to make mortgage payments using funds from the trust or estate. Doing so can help the estate avoid late fees, default or foreclosure.
Read The Trust Or The Will
If one is unsure, they should look to the trust document or the will for answers. If those documents direct the executor to use trust or estate funds to pay the mortgage, no further investigation is required. However, most documents contain only general language on debt payment. If an heir or an executor is unsure about language within a document, they should call a Real Estate Lawyer in Philadelphia for advice.
Heirs’ Rights
A person who inherits land or a home that’s under a mortgage usually inherits the loan as well; the new owner assumes payments with no change in the loan’s terms. The Garn-St. Germain Depository Institutions Act provides situations where lenders cannot enforce payment-on-sale provisions.
Heirs’ Options
If laws cover inherited property, its new owner can continue making mortgage payments under the loan’s current terms. This may be advantageous if the new landowner can successfully make payments; they don’t have to re-apply for a loan and endure the hassle and cost of the process.
When Beneficiaries Can’t Afford The Mortgage
An heir who cannot afford to pay the mortgage and other expenses must consider other avenues. If they cannot secure affordable refinancing, or if the owner doesn’t want to remain on the property or rent it, a sale may be the best choice. If the land or home is sold within one year of the former owner’s death, the heir isn’t likely to owe capital gains taxes. A Real Estate Lawyer in Philadelphia can advise clients on what to do if they can’t afford to make mortgage payments.
