Refinancing Inherited Property and Estates

January 30, 2013 by 30 Comments

 

Why would you need to refinance an inherited property?

When a person passes away and leaves a property to one or more people, the property first goes into an estate that has to be distributed out after paying any expenses or debts of the estate. For example, if you are left a home worth $200,000 but there was a $100,000 loan on the property owed by the person who died, that $100,000 loan needs to be paid off before you will get title and own the property. With the increased use of reverse mortgages in recent years, it is just as likely as not that a property will have a mortgage on it when the owner dies.

Mortgage loans cannot be issued to estates.  Any existing liens on a property in an estate will need to be settled.  Even if there is no mortgage or property liens, there are often other expenses that need to be paid off before the estate is distributed.  Usually mortgage lenders will work with the attorney handling the estate to establish a plan for paying off the loan through sale of the property or refinancing by one or more of the heirs.

Mortgage refinancing – take the title and refinance at the same time:

If you are an heir to a property and you would like to keep that property, you can refinance into a new mortgage loan and take title to the property from the estate at the same time. Technically, this transaction can be both a refinance loan and a purchase mortgage at the same time depending on whether or not there are other heirs involved.

If you are the only heir to a property with a mortgage, you may need a loan to acquire the property.  This transaction can be treated as a refinance and as a result you probably will be able to complete the transaction at minimal cost.  You can finance up to 75% of the value of the home if needed (and up to 85% in some cases through the FHA Program and you will be able to keep any proceeds of the loan that do not go to pay off expenses of the estate.
Refinancing a property with multiple heirs:

If you have inherited a property with one or more additional heirs and you want to own the property for yourself, you can agree to refinance and use the proceeds of that refinance to pay each heir the value of their share. This transaction is technically a refinance and a purchase, but since you have at least one share of ownership in the property, you can usually use that share of ownership as your down payment or equity into the transaction so you will not need to make a cash deposit at closing.

It’s vitally important that you consult with both a lawyer and a loan officer if you inherit property that needs to be refinanced.  They will be able to make you aware of any applicable state and federal laws, and will be able to guide you on your best course of action.  


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30 Comments

  • Artamise.Lee@va.gov' Artamise Lee says:

    I’m inquiring about remodeling my grandfathers home. He passed back in January and my mother is passed since 2007. I have two aunts who are still living and we all agreed that it would be ok for me as the granddaughter to continue to stay here since it’s paid for and I’m doing all the work. No will was left, but we wanted to know how to go about financing the project. Thank you….

  • j-dmeck@comcast.net' Joe Eckhardt says:

    I have a house I inherited free and clear. Everyone I talked to says they will not give me a mortgage until I own (have new title) for two years. I want to take advantage of the rates now, to pay for my child’s education. Where can I get a mortgage.

  • Joe, I’ve had a loan officer reach out to you via email.

  • adbeasley16@gmail.com' Amy Dawn Beasley says:

    I have a home that I have been living in since 2007 it was my dads he passed in 2006 . My siblings and I agreed I could stay there rent and mortgage free until I sold the home and the n we would split it 6 ways. Well one of my siblings now has decided he wants his portion of the home and now I need to know what my options are

  • lavon9330@gmail.com' Brian Mack says:

    I inherited a home from my moms death don’t have good credit and the house appraised for 77,thousand and the mortgage is 99.322 really need advice.

  • karenaustin62@gmail.com' Karen Austin says:

    I inherited a house that was given to me by my aunt, she transferred everything to me however, the home is really in a bad condition and needs a lot of work. As a first time home buyer how do I go about getting a refinance loan to do renovations. The house is free and clear of debt.

  • I don’t think this is something we would be able to help you with. I’m afraid you would probably want to speak with an estate attorney. This is not legal advice.

  • apenner@totalmortgage.com' Andrew Penner says:

    Hi Karen, we’ve seen situations like this before, and would love to try and help you. Would you mind if I had one of our mortgage experts reach out to you via email to discuss the details of your home renovations?

  • donhrpr@gmail.com' Don Harper says:

    This is a similar situation. My parents have quit-deeded a home to me as an early wedding present. The home is paid for and the deed processed at the court house this week. So I’ve been the owner for a few days, and the house needs extensive repairs before it can be lived in. I’ve already taken out home owner’s insurance in my name. I’ve planned on spending between $75k – $100k to rehab it. The current unrepaired value is approx. $165, so it would definitely appraise but the banks won’t lend on it because they say I must own it for at least 2 years before I can do a cash-out refinance (mortgage). I have good credit and salary and need to have the house done as soon as possible (the roof needs to be replaced-leaking, estimates averaged $12k). What would my options be for obtaining a large amount to repair the house soon? A HELOC was the same scenario, must have title for 24 months. I live in Georgia. I need to figure how how to get the money quick so I can repair the roof at the absolute least. Thank you for your time.

  • rcweaver@cox.net' Rose Weaver says:

    We inherited my moms completely paid for house at her passing in May. It is to be split equally between us five children. We are letting one sibling have it for $150000 and she has two shares since one brother gave her his share. She is in the process to get a cash out refinance to pay the other three of us off. She started this process on July 16. Loan officer says it can take until September 26 though it’s already gone to the underwriter. Does this normally take two months?! She’s only borrowing $96000 on an appraised $182000 house. Does a quit claim deed need to be signed?
    Thanks.

  • Carter Wessman says:

    If the home doesn’t have to go through probate then the only reason why it would take two months is because of the turn times of the lender. There should be no need for a quit claim because you can refinance in her name and get everyone else off the deed.

    Carter

  • lplattm40@gmail.com' nadine thompspn says:

    Both parents are deceased , i am one of 3 siblings.. i live in the home mortgage free. the home is in desperate need of repairs. What do i need to do to use the equity in the home to make repairs?

  • cameronhoffman@bellsouth.net' Cameron Hoffman says:

    I’m trying to buy a property from my mom’s estate. I’m one of three siblings, so proceeds will go to the estate to be divided equally. All parties have agreed to selling price (contingent on appraisal) as well as a judge has signed an order approving the sale. My question is, should I be able to get a conventional loan? Just wondering because it’s not a typical “arms-length” transaction. Also, should estate finances (i.e. payment history) have any bearing qualifying for the loan?

  • Carter Wessman says:

    Hi Cameron,

    It’s possible that this is something we could help you with, but we’d need more information before we know for sure. You should call Neal Ludovico (one of our senior loan officers) at 203-783-4537. I’m sure he’d be happy to discuss your situation.

    Carter

  • kbutler072006@gmail.com' Kristi Butler says:

    My grandma passed in September, she left me my home (which I had already been living in and paying the mortgage on for the past 5 years- it has been paid out of my bank account to the mortgage company EVERY MONTH on time or early), I do not have good credit to refinance., but I AM capable of continuing the loan. The will was probated and the tax office has the property listed in my name now, our attorney told me it was simply a matter of contacting the mortgage company and having the name changed on the loan. I have spoken to several attorneys and ALL of them have different answers. On several legal websites AND from a couple of different attorneys I have found out there is a federal law preventing the mortgage company to accelerate the loan, simply because I am a relative (granddaughter) The mortgage company told me to fill out this packet so they can add my name to it for communications, but if I wasn’t to become financially responsible I have to apply for credit. If I just put my name on for communications what does that mean? If there is an overpayment on escrow will the check sent be in my name? Can they still foreclose on the home if I am keeping payments current but am unable to qualify for credit???

  • Carter Wessman says:

    Hi Kristi,

    Thanks for reaching out. These are all questions that a qualified loan officer would be happy to speak with you about. It’s also possible that we have a refinance program that would work with your current credit profile. You should call Neal Ludovico (one of our senior loan officers) at 203-783-4537.

    Carter

  • mclaughlin914@yahoo.com' Angie says:

    My mom just passed away in November. I am the only child and inherit the house which has a mortgage and owners equity loan on it. I’m very capable of paying these monthly but I was wondering how I could consolidate them. My credit is not good due to divorce. I have been living with her for 7 years and do not want to lose the house. I have been to probate but wasn’t told anything except to wait and hear from anyone she owes for 8 months. I don’t want to lose the house so do I continue payments under her name or can I refinance in my name now.,

  • Carter Wessman says:

    Hi Angie,

    We may be able to help with a refinance depending on your credit score and a few other details. Whether you should refinance now or wait to hear from potential creditors is a question for an attorney. If you’d like to discuss further, you should contact Neal Ludovico, one of senior loan officers at 203-783-4537.

    Carter

  • jan2curtis@aol.com' Janet Curtis says:

    I have lived in a home owned by my parents since 1990. mom is alone now and wants to put my name n title now so i can get a reverse mortgage and repair and keep the house instead of waiting to inherit it. do i have to have gr8 credit or live two more yrs in house to get reverse mort?

  • Carter Wessman says:

    Hi Janet,

    It’s hard to say without more information. You should call Neal Ludovico (one of our senior loan officers) at 203-783-4537.

    Carter

  • jgardiner03@gmail.com' Jennifer Gardiner says:

    I have inherited a property that I have lived in with my grandmother since 2012, she passed in May of 2015. There is a 83000 loan on the house, that I am currently making payments on. How do I go about getting the mortgage out of her name and into mine. I would also like to see if I could cash out on any equity so that I may make improvements to the property. There is currently an FHA loan on the house.

  • Carter Wessman says:

    Hi Jennifer,

    You should really call Neil Ludovico, one of our senior loan officers, at 203-783-4537. He would be happy to discuss your situation with you.

    Carter

  • kolotitapetelo@gmail.com' Nati Petelo says:

    Hi,
    My mom inherited a home from her best friend. We are still currently waiting and it has been 2 months now. We were told by the executor that we won’t be able to have the house because we would have to qualify for a mortgage loan and that we would have to also pay everyone else if they contest to the will and pay her as well for her share. I don’t understand this because it is not our job to pay everyone for their part of the will. It is hers. We have paid off his mortgage debt and have been paying his bills. Please shed some light on our situation. Thank you.

  • Carter Wessman says:

    Hi Nati,

    You should really discuss this with a loan specialist. If you’d like, I could have one contact you.

    Carter

  • tiners35@gmail.com' Tina says:

    I am currently living in my parents’ estate. My father passed 3 years ago in November. I have been making all payments on the home since then. I am wanting to refinance the home and buy out my brother. My credit score is 20 points away and I’m hoping to be able to do this soon. Is there something I can do now? The bank it is mortgaged through currently originally told me I only needed a 580…and now is saying I need a 640. Can anything be done to buy out my brother and take over title?

  • Carter Wessman says:

    Hi Tina,

    There might be a way we could help you out. You should contact Neil Ludovico, one of our senior loan officers, at 203-783-4537.

    Carter

  • kl5574@mac.com' karen says:

    Inherited a townhome from my sister that has a mortgage. It was a rental property and now the tenants have moved out. I need to make repairs. How can I get my name on the mortgage to refinance. I have brother and a niece who will sign quit claim deeds if necessary.

  • Carter Wessman says:

    Hi Karen,

    In a situation like this, more information is needed before an answer can be provided. A loan officer should be reaching out to you via the email you provided.

    Carter

  • brien.sfbg@gmail.com' Michael says:

    Home Value Approx. $1mm
    Current loan Approx $235k
    Father date of death 5-13-08
    Probate done (by me via NOLO)
    Title – I would like to see how it’s vested but submitted paper work to county at end of probate
    Want cash out refi with approx $50k to prep house for sale.
    My credit approx 680
    Sibling has no credit
    My job w2 for 2+ yrs
    Mortgage 2x 30 dod in last 12 months
    My Income $68k
    Any chance this can be approved.

  • Carter Wessman says:

    Hi Michael,

    It might be possible. Eric Khan–one of our top loan officers here–should be reaching out to you via the email you provided.

    Carter

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