If a home is left to someone in a will, what happens with the mortgage? ?

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My mother recently passed away. The home that we live in (she was disabled and lived with myself and my family) was mortgaged/titled by her, but my husband and I have made the mortgage payments since the inception of the loan. According to the will, my husband and I will get the home. The mortgage balance is about 91K but I do not believe there to be sufficient funds in the estate to pay off the home as mom had originally intended. I have spoken to the mortgage company who said that once the title is in our names, we can refinance after 6 months or we can leave everything as-is and continue to pay on the mortgage under her name. What rights do we have legally? Does the estate have to pay off the mortgage or is it okay to continue to pay on it? Will there be capital gains on the home? We live in Texas, FYI.
No, there is no mortgage protection ins. that I know of, but I will definately double check. We do inherit the home and intend to change the title into our names asap.The mortgage company says the loan is non-assumable. We can refinance after 6 months of having the title in our name. We can “purchase” the remainder of the mortgage as soon as we have the title changed, but would have to pay 3.5% down.We would prefer to have the mortgage in our name, but we have some derogatory credit issues that might prevent us from getting a loan or make it cost-prohibitive.We are looking into it with a broker right now to see where we stand. My husband and I talked and are thinking it would be best to leave things are they are for a year.That way we can get our feet back under us and figure out what we need to do- make good decisions.We don’t want to make a rash decision about this and then have a hard time in the future and we don’t want to delay the probate. We would like to move on with our lives.
Just to clarify, my husband and I are living in the home currently. It will be occupied regardless of how we choose to proceed. I just wasn’t sure of how the mortgage was handled since it is in her name. The title will be transferred to us since we inherit it per the will.
And my husband asn I have been paying the mortgage, even with it in mom’s name, since the inception of the loan. We can prove (have bank statments) to prove we have paid the loan.

6 Comments
  1. Reply
    chatsplas@sbcglobal.net
    May 2, 2011 at 6:00 am

    READ the mortgage and other loan docs

    Did your mother have insurance to pay off the mortgage in case of her death?

    Consult an attorney with all your documents

  2. Reply
    infinite crisis 247
    May 2, 2011 at 6:37 am

    if you plan on staying in the house until the completion of the loan, it might be better off leaving things as they are. the mortgage company does not care who’s name is on the title, they only care about getting their money. now, the catch here is if if you want to sell. in that particular case, you would need yourself on the title. if you wanted to refinance, you would probably have to provide the mortgage company with the death certificate as well as the estate decree.

  3. Reply
    Landlord
    May 2, 2011 at 7:31 am

    Your bank explained it correctly. You have the right to just assume her loan, you do not need to qualify, just change the name.

    If her estate has other assets and you inherited those assets they can be used to pay down the loan.

    Yes, you will have capital gains on the house, but not until you sell it. The entire thing will be a gain for you since you inherited it, did not buy it yourself.

  4. Reply
    Rafael P
    May 2, 2011 at 7:42 am

    Well, there is one obvious issue I dont see being addressed here, which is homeowners insurance. You need to make sure that you have a policy in your name, and not your mothers name. However, since there is a lienholder on the property, they should actually be listed as loss payee. Which means that they are generally notified by the insurance company. If you keep the policy in your mothers name, and they find that she is deceased when it comes time for a payout, or if you switch the deed to your name, they will deny a payout.

    As for capital gains, there should not necessarily be any as your mother did not sell the house and is now deceased, but you may face inheritance taxes. You definitely need to have some legal advice on all of this, but I would also ask the lender if they will accept proof of your payment over the years as your record of payment history (provided you actually have the proof you have been making the payments). The reason for the 6 months is simply that they require title seasoning for the Mortgage Backed Securities. The good news is that this should be treated as a refinance, and not as a purchase. That means that for example, if the balance is the 91k, and the value is 120k, you will be financing approximately 75-80% of the value, which will help you to get a better interest rate.

  5. Reply
    Ed Atun
    May 2, 2011 at 8:40 am

    The mortgage stays with the house. You inherit it , too. Leave it alone and continue making the payments. Getting a new loan always costs $ 3,000 or more in fees.

  6. Reply
    Doctor Deth
    May 2, 2011 at 9:25 am

    someone still has to pay the mortgage – just sell it, keep the profit and use the money for something else – just letting the house sit there for a year and YOU having to pay mortgage insurance and utiities with no one living in it doesn’t make much sense

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