Do I need to refinance or is my bank just suggesting this because they are trying to help me?
April 3, 2012 1:38 PM   Subscribe

I have inherited a house in Massachusetts that has a mortgage. I am the executor and also one of the beneficiaries. The other beneficiary and I want to assume ownership of the house together. I contacted the bank that holds the mortgage and they suggested that I refinance. I'd prefer not to. I'm not sure if I have to. Do I have options? I have a lawyer and a banker but I'd like advice on how to approach this inheritance issue before I talk to them more about this.

The house is a sort of big house with about 20% left to pay on the mortgage. It's insured, not currently occupied but well looked after. We have been making the mortgage payments since the death of the owner which was partway through last year. We could pay off the mortgage if necessary but would prefer not to.

I currently rent, and the co-beneficiary owns her own home and has a mortgage. Neither of us wants to go through the huge paperwork timesuck that is a refi but we will if this is the only option. What I was hoping is that we could just assume the mortgage and get our names on the title. The bank in our initial email conversation seems to be doing us a favor by offering a refi at a lower rate but both me and the co-beneficiary would pay cash money at this point to not do any more paperwork for a while.

So I am not sure at this point if I go back to the bank and say "No refi, what are my other options?" or go to my lawyer and say "How do I get my name on the mortgage without refi-ing?" or if I just need to learn to stop worrying and love the refi? Having never been in a similar situation before, I'm not sure what my options are and how much they're legally determined and how much they're up to the individual bank (a small local bank if it matters). Thanks for pointers. I assure you I will run my plan through lawyers and bankers before doing anything specific.
posted by anonymous to Work & Money (10 answers total) 2 users marked this as a favorite
I don't think there's another way. I know that (in many if not most jurisdictions) after a divorce, when one party keeps a mortgaged property, the only way to get the other party's name the mortgage (and title) is to refinance. I'd imagine it works similarly in the other direction.
posted by devinemissk at 2:15 PM on April 3, 2012 the mortgage.
posted by devinemissk at 2:15 PM on April 3, 2012

I cannot offer you any advice about Massachusetts law, and I would not offer advice at any rate. (You know the drill.)

The mortgage agreement should tell you what you need to know about this issue. It often will provide for acceleration on the occurrence of certain contingencies, including sale by the owner and bankruptcy of the owner. Find out if it addresses the death of the owner.

It is certainly conceivable that the mortgage could stay in the name of the deceased. The bank may not care as long as the payments are made.

Another question is how to structure ownership of the home. You and the other beneficiary could take over as tenants in common, but a lawyer may suggest setting up a limited liability company, particularly if you plan to rent the home out to others.
posted by yclipse at 2:18 PM on April 3, 2012

Go to the lawyer, and ask if there's a paralegal who would coordinate the refi paperwork for you. The lower rate will pay the cost over time.

Also, co-ownership can have pitfalls, so have the lawyer advise you on that.
posted by theora55 at 2:45 PM on April 3, 2012

I can recommend a Massachusetts real estate lawyer if you need one - MeMail me!
posted by usonian at 5:12 PM on April 3, 2012

Not an answer to your question but perhaps some helpful information. Make sure to check that your insurance policy covers an unoccupied house. When our house was unoccupied in MA we had to purchase special insurance that was outrageously expensive because our homeowners policy wouldn't cover any claims on a house that had been unoccupied for more than 30 days.
posted by a22lamia at 5:48 PM on April 3, 2012

IANAL but I can think of a couple reasons why you might want to refinance:

-If everything (mortgage, title, etc.) stays in the deceased's name, what if something happens? If there is fire or water damage, even if the mortgage, property tax, and insurance are always kept paid up, what happens when the insurance learns the policyholder is deceased?

-Mortgage rates have dropped significantly recently; even if there are only a few years left on the note, you could still save a bundle by refinancing.

-Going through the refi process would also, out of necessity, involve a number of things that as someone assuming ownership of a house, you would probably want done anyway. A current appraisal, a certified home inspection (not always required, but a very good idea), and a title search will all be part of the process. The last thing you'd want is to find out the house is rotten with termites or has roof damage, or there are problems with the title or liens against the property you don't know about.
posted by xedrik at 7:59 PM on April 3, 2012

My limited understanding is that you can assume the mortgage without refinancing. Google "assumption of mortgage" and similar terms.
posted by southern_sky at 9:49 PM on April 3, 2012

I inherited a house and its mortgage 20 years ago (in California). My name was somehow added to the mortgage, refi was never even brought up. I don't remember now how exactly my name was added, but I believe it was done through my probate lawyer. So... lawyer.

God, how I wish I'd paid off the mortgage with the cash I also inherited. Instead I blew through the cash and still had to make mortgage payments for umpteen years. I was young and got bad, if well-meaning financial advice from family members. If your mortgage is really that low, you aren't getting that much of a tax write-off by not paying off your mortgage.
posted by vignettist at 11:37 PM on April 3, 2012

Thinking out loud here, you might be able to keep the mortgage in your mother's name as long as the will remains in probate. Whether that's a good idea is for you to decide.
posted by alms at 6:49 AM on April 4, 2012

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