Don’t Fall Behind
When inheriting a mortgage, the game plan varies depending on how many heirs are involved. For starters, the mortgage should continue to be paid on time and without delay. This is non-negotiable. When lenders notice that the mortgage is behind and that heirs are now the owners of the property, it could cause a chain reaction of negative events which you don’t want to happen. When families are inheriting a mortgage, they tend to get a couple months behind before the lender hits them with an unexpected foreclosure notice stating that their actually 4 months behind. Yes, it can get out of hand quickly.
So by all means, keep the account current and never fall behind. After this has been established, find all of the paperwork you can in regards to the mortgage. You need to know whether it’s a fixed or adjustable rate mortgage and how many years are left on the note.
Do A Title Search
At this point in time it would be a good idea to get a title search done to see if there are any other 2ndmortgages attached to the property. It’s not uncommon to discover that the deceased individual took out another mortgage in the form of a home-equity line of credit or loan in order to pay for improvements or upgrades to the inherited property you now own.
Once you have the title search in hand, you essentially know everything about the property with the exception of one important item – the market value. With that being said, it wouldn’t hurt for you to have an appraiser come out and value the home. This is great for two reasons. For one, you get to determine your new cost basis in the property for IRS purposes; and two, you will have an experts opinion of value, instead of your uncle’s thoughts on how much the property is worth. Once the appraisal is complete, you will be able to make an informed decision as to whether the inherited property, with the attached mortgage(s), will be a profitable venture or a lost cause for you and the other heirs.
Build A Relationship
At this point, most heirs tend to take their eyes off the ball after they’ve found the mortgage paperwork and done the title research. They figure that if they continue to make the mortgage payments on time, that everything will be ok. In a lot of cases this holds true when the mortgage is being paid. The key is to take the extra step of making contact with the lender/bank as soon as possible so that you can have a point of contact that will work with you if at any time things go south. Maybe the deceased individual had an agreement with the lender that after 15 years of paying on the house a balloon payment for the remaining balance on the loan was due. You never know.
Speaking to and building a quality relationship with a dedicated loan officer or bank rep who handles the mortgage account will be in your best interest since they will be your point of contact for any type of hiccups which could happen along the way. There have been many heirs who have lost inherited property to foreclosure due to the fact that they couldn’t find a representative who would work with them on getting the loan worked out. This is all apart of dealing with inheriting a mortgage. What you may view as unnecessary could save you thousands of dollars in profits in the long run if you do decide to sell one day.
If you find yourself inheriting a mortgage and need help on finding the best resources to help you navigate this process, feel free to give us a call anytime! We’re here to help you.