Inherited A Home With A Mortgage? Here Is The Info You Need To Know

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Powered by HomeActions for Laura S. Rossinow, Broker/Agent, Keller Williams Realty, Newton, MA

Spouses, children and others who get title to a home after the death of a loved one can now be added to the property’s mortgage without having to first qualify financially, the Consumer Financial Protection Bureau (CFPB) said in an interpretive rule change.

“Losing a loved one should not mean also losing your home. Today’s interpretive rule makes it clear that when family members inherit property, they can take over the mortgage without jumping through unnecessary hoops,” said CFPB Director Richard Cordray. “This gives heirs an opportunity to work with the lender to pay off the loan or seek a loan modification.”

In January 2014, new mortgage rules went into effect to protect consumers from irresponsible loans. One of those rules said your lender has to make a reasonable, good-faith determination that you’re able to repay a loan.

That rule caused problems when a home with a mortgage legally transferred from family members to heirs who couldn’t qualify to add their name to the mortgage.

For example, if the heir seeks a modification to ensure they can retain the home, the creditor may refuse to modify the debt on the grounds that the heir is not officially named on the mortgage.

Now, lenders don’t have to determine your ability to repay the mortgage before formally recognizing you as the borrower. Once you’re named as the borrower, it’s easier for you to get account information, pay off the loan or seek a loan modification.

The interpretive rule also covers transfers, including transfers to living trusts, transfers during life from parents to children, transfers resulting from divorce or legal separation and other family-related transfers.

The CFPB also told mortgage servicers (companies that collect mortgage payments from borrower) have to promptly identify and communicate with surviving family members and others who have a legal interest in an inherited property.

Inherited a home? I can give you a current market value. Even if you keep the home, you’ll need to know its value at the time you inherited it. That value is used to calculate your capital gains if you eventually sell the home.