Once upon a time, owning a home outright was the norm, and dying with a mortgage was unthinkable. Today however, with home prices being as high as they are, and with “downsizing” being the new trend among elderly individuals, it is not uncommon to die with a significant amount of mortgage left to pay off. According toConsumerFinance.gov, as of 2010 35 percent of individuals aged 65-74 still had a mortgage debt (a 15 percent increase from 1992), while a little more than 20 percent of individuals 75+ still owed money on their homes (a 15 percent increase from 1992). As more and more people are buying homes later in life, those numbers are only projected to increase. Which begs the question: if you still have a mortgage on your home when you pass, what becomes of the home?
There are several ways that your estate may be handled if you still owe a mortgage on your home when you pass away. If you still owe a significant amount of money on your home, and if you are worried about what will become of your home (and the subsequent mortgage) when you are gone, contact Jim A. Lyon Law Firm. Our Oklahoma City probate lawyer can go over your options with you and help you prepare your estate plan in such a way that takes your mortgage into account.
Possible Ways to Handle a Home with a Mortgage After Death
There are several things that may become of your home once you pass if you still owe money on it. Below are six common scenarios, each of which that you should be aware of so that you may better plan for the distribution of your estate.
1. Your heirs take over the loan.
In most cases, if an individual passes away with a mortgage still on their home, their heirs have the option of taking on both the home and the mortgage. In this instance, the loan would simply be passed to one of your beneficiaries. They would keep the same interest rate and payment that you currently have, and would be exempt from the “due-on-sale” or acceleration clause typically enacted by lenders when a property is transferred.
2. Your heirs refinance the home loan.
Sometimes, an heir is unable to afford the monthly payments on a mortgage; other times, they can get a better interest rate. In either instance, they have the option of refinancing the home.
3. Your heirs get the property free and clear.
If you have enough money and/or assets in your estate, your estate may be able to pay off the remainder of your mortgage. In this instance, your beneficiaries would get the home free and clear.
4. Your heirs cannot afford the monthly payments.
Unfortunately, sometimes a beneficiary cannot afford the payments on a home. If this is the case with your beneficiaries, they may choose to sell the home upon your death. If you are upside down on your mortgage – or when the house is worth less than what you owe – your family may just choose to walk away from the home altogether.
5. Your home is seized to pay off other debts.
If you have several unpaid bills, your heirs may not be given the chance to decide what they want to do with your home; in order to repay your debts, the state may require that the home be sold to repay your debts.
Consult with an Oklahoma City Estate Planning Attorney
At Jim A. Lyon Law Firm, we want to help you better plan your estate so that your heirs are not left to sort out a complex mess in the event of your death. If you still owe a significant amount on your mortgage, it may be in your best interest to speak with an Oklahoma estate planning attorney about the options you have regarding how to plan for the distribution of your home and mortgage. Call our estate planning law firm today at 405-843-0461 to schedule a free consultation.