What happens ifI leave a home to a person when there is a balance on the mortgage?

The person has a bankruptcy and cannot get a loan. However, they are helping pay half of my mortgage and there is no mortgage insurance to cover the remaining balance.

Asked on March 24, 2011 under Estate Planning, Ohio

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

In a situation such as this, the options are: sell the house and pay off the mortgage; re-finance the mortgage; take over the house and continue making the monthly payments yourself.  While this last option appears to be the best for the beneficiary in this case, it is only available if: (1) All other debts of the estate are paid (if not, the house would have to be sold to pay off the mortgage with any excess funds going to pay off estate debt), and (2) The mortgage does not have an "acceleration clause"not that is specifically triggered by the death of the owner.  That is a provision that allows the lender to demand immediate payment in full of the remaining balance of a mortgage loan on the occurrence of a specific event (in this case the mortgagor's death).  If neither of these 2 exceptions apply, the lender is required to continue to accept the beneficiaries monthly payments until the maturity date. 

Note:  If the maturity date is years later, then it is of benefit for the person who is inheriting in that they do not have to go through the lender's application process and prove that he or she qualifies for the mortgage.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.