Most people have mortgages on their homes, and loved ones are often surprised that a mortgage doesn’t magically disappear when the property owner passes away. We often hear from heirs who want to know what their options are for dealing with an outstanding mortgage as they move through the Hillsborough County probate process.
How a mortgage on a property is handled after the loss of a loved one depends on a variety of factors, including the specific language in the original owner’s estate plan and the rules of the lender. We advise family members to do their homework and wait to formally “take over” payments on a property until they can answer the following questions:
- What does the estate plan say?
Before making any financial decisions, it’s important to take a close look at any estate planning documents the deceased left behind. Sometimes, people will leave specific instructions for how they want an outstanding mortgage handled in their will or trust that a court or trustee will be bound to follow. For example, if a senior wills his home to his oldest daughter free and clear because she took care of him, the mortgage may need to be paid off with other assets from the estate so the daughter inherits the property without an encumbrance. Again, each plan is different, and it can be helpful to work with an attorney who can guide you through your options.
- Can you prove that you are a “Successor in Interest?”
Those who stand to inherit a property with a mortgage may have federal rights as “Successors in Interest.” A Successor in Interest is generally defined as the spouse, child, or heir of a deceased borrower or other party with an interest in the property.
In the past, banks would refuse to communicate or work with heirs who had an interest in a property because they were not the legal owners. Instead, interested parties had to wait until the probate or estate administration process was complete to communicate about the loan or work out modifications. However, probate can take several months to several years to complete, and during that time, significant unpaid balances can accumulate or the bank may even move to start foreclosure proceedings.
Fortunately, federal laws were recently enacted to help those who can prove that they are “Successors in Interest.” This is generally done by producing a copy of the will, trust, the death certificate of the property owner, and possibly a birth certificate to prove a blood relationship if there was no estate plan at the time of death.
Once a bank establishes a person as a Successor in Interest, he or she receives the same protections under federal servicing laws as the original buyer, including the ability to get information on the loan, ask for an accounting, and enter into modification agreements. Such modification agreements may even include arraignments that allow heirs to take over the existing mortgage.
Still Unsure of Your Options?
Closing out a loved one’s estate after his or her passing can be tricky, especially when there is outstanding debt involved. If you’re unsure of your options, especially as it relates to dealing with a mortgage and whether or not you have the right to assume payments on a property, please contact our office at (813) 438-8503 to set up an appointment.