INHERITING REAL PROPERTY WITH A MORTGAGE IN GEORGIA: What You Need to Know
As a Georgia probate attorney, I often encounter clients who are inheriting real property with an existing mortgage. This situation can be complex and emotionally challenging, especially when dealing with the loss of a loved one. In this blog post, we'll explore your options and important considerations if you find yourself in this position.
Understanding Your Rights as an Inheritor
First and foremost, it's crucial to understand that inheriting property with a mortgage doesn't automatically trigger the "due on sale" clause. In Georgia, as in many states, there are protections in place for inheritors. The Garn-St. Germain Depository Institutions Act of 1982, which is federal law, provides these protections.
Under O.C.G.A. § 44-14-162.3, which aligns with federal law, lenders cannot accelerate a mortgage solely because the property has transferred to a relative through inheritance. This means you can continue making mortgage payments without fear of the entire loan balance becoming immediately due.
Options for Inherited Property with a Mortgage
Keep the Property and Assume the Mortgage: You can choose to keep the property and continue making mortgage payments. This option allows you to maintain the existing loan terms, which could be advantageous if the interest rate is favorable.
Refinance the Mortgage: If you want to keep the property but the current mortgage terms aren't ideal, refinancing might be a good option. This allows you to potentially secure better terms or lower monthly payments.
Sell the Property: If maintaining the property isn't feasible or desired, you can choose to sell it. The proceeds from the sale would first go towards paying off the remaining mortgage balance, which would reduce any payout the Estate, and thus, you as an heir or beneficiary would receive.
Deed in Lieu of Foreclosure: In cases where the property is underwater (worth less than the mortgage balance), you might consider negotiating a deed in lieu of foreclosure with the lender.
With an estate, there are certain steps that will need to be undertaken in order to make sure the proper party is signing any loan and/or title documents and may require a transfer of title ahead of any refinancing. Make sure to discuss these considerations with your co-inheritors, the Executor or Administrator of the Estate, and your probate attorney and lender before committing to a decision.
It should also be noted that communications with the Lender may not be permitted unless you have been appointed as the Executor or the Administrator of the Estate. Thus, it is wise that where real property subject to a mortgage is involved, you not delay in consulting with a probate attorney and opening the estate in the proper probate court.
Considerations for Property Pending Sale
If the inherited property is already pending sale, it's crucial to maintain mortgage payments until the sale is complete. Failing to do so could result in mortgage default and potentially jeopardize the sale should the Lender choose to foreclose during the pending sale. Communicate with the lender about the pending sale and ensure all parties are aware of the timeline and responsibilities.
The Danger of Foreclosure
It's vital to understand that inheriting a property doesn't absolve you of the responsibility to maintain mortgage payments. While only a co-signor of the mortgage loan is liable for the mortgage payments legally, if the mortgage payments are not kept current, the lender has the right to initiate foreclosure proceedings, as outlined in O.C.G.A. § 44-14-162 et seq., even against an estate or the heirs/ beneficiaries of an estate.
Foreclosure can have serious consequences, including damage to your credit score and potential legal liabilities if you are a co-signor. These consequences as a an inheritor if you are not on the loan means a reduction in your inheritance and loss of the property entirely. If you're struggling to make payments, reach out to the lender immediately to discuss potential options, such as loan modification or forbearance.
Seeking Professional Guidance
Inheriting property with a mortgage involves complex legal and financial considerations. It's always advisable to consult with a probate attorney and a financial advisor to understand your options fully and make the best decision for your specific situation.
Remember, every inheritance situation is unique. By understanding your rights and options, you can navigate this process more confidently and make informed decisions about your inherited property.
If you have questions, just want information, or need to open a probate estate in Georgia, Your Hometown Attorney is ready to offer our experience and guidance. Call us today to schedule your Informational and Planning Session at 706-359-3332.