Can A Mortgaged House Be Inherited? Heirs Options

Can a mortgaged house be inherited? The answer is yes! However, a mortgaged property can present a problem for those who acquire this type of property through an inheritance.

If you are wondering how to inherit a house, this factor can be given either because the property was included in the deceased person’s will or because it passes to a direct relative. However, not only are the rights to the property inherited, but existing debts and the responsibility to maintain the estate are also included.

In inheritances, the heirs not only receive property and rights but also debts. And one of the usual debts is the mortgage of the inherited home.

You can reject the inheritance or accept it. In case he accepts it, the heir must pay the pending loan associated with the home, for which he will have to change the ownership of the mortgage and put it in his name and the bank will have to accept the change of owner, through a mortgage subrogation.

For this change, it is sufficient to present the death certificate of the holder of the will.

Can A Mortgaged House Be Inherited?

Let’s see the different situations that the heir may face:

Life insurance

It is becoming more and more common to have life insurance linked to the mortgage, it is not mandatory, but most mortgage loans have life insurance that covers the debt in the event of the owner’s death. 

In this case, the insurer is in charge of paying the pending mortgage to the bank, with which the house passes to the heir free of charge. What formalities does the heir need to complete? You must present the documentation that certifies the death to the insurer and the bank.

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To find out if there is life insurance, you have to go to the single Life Insurance Registry and provide the literal death certificate.

What if there are two holders on the mortgage?

This is a common situation: the purchase of a home through a mortgage is distributed among the owners at 50%. 

Thus, by inheriting the mortgaged house, the heirs receive 50% of the debt corresponding to the deceased owner. But if the heirs reject the inheritance, it is the living owner who must assume the entire loan.

Accept the inheritance or inherit the home mortgage for the benefit of inventory

In case of accepting the inheritance, the beneficiary assumes the mortgage payment and the bank must make the change of the owner through the mortgage subrogation.

But in the case of accepting the inheritance for the benefit of inventory, the debts will be faced with the inherited patrimony. Thus, the heir will not see his own assets compromised. 

This procedure must be done before a judge or a notary. The objective is to pay the mortgage with the estate of the inheritance up to the value of the inherited assets.

What procedures must the heirs follow?

The heir must present in the bank:

– The death certificate, is obtained from the Civil Registry.

– The certificate of last wills in which if there is a will, the name of the notary appears and is requested in the territorial offices of the Ministry of Justice.

– The testament or declaration of heirs, which is in the notary where it was granted.

– The deed of adjudication of the inheritance, is also carried out by the notary.

– The certificate of payment of inheritance tax. This tax must be declared in the office of the territory where the deceased had his habitual residence (greater number of days in the last five years). In the event that the deceased did not have a residence in the particular country, he will have to present himself at the Tax Office of the country because the competence belongs to the State. The Treasury gives a period of six months to pay the inheritance taxes. And you also have to pay the municipal capital gain.

– If you finally decide to renounce the inheritance, you must present the public deed of resignation.

In exchange, the bank must deliver all the information about the mortgage signed by the owner to the heirs.

How to inherit a mortgaged house that was obtained with a joint mortgage loan

There are endless myths about mortgage loans, but it is a reality that there are financial institutions that authorize real estate mortgages with joint loans. The advantage of these credits is that they allow payments to be much more accessible to the beneficiaries.

Now, in the event that one of the beneficiaries of the joint mortgage loan dies, there are two options:

• That there is mortgage insurance: when one of the beneficiaries dies, this insurance will cover the total balance of the mortgage. The property is inherited by the other beneficiary with no remaining debt.

• That there is no mortgage insurance: in case the equity has not been insured, whoever has been the beneficiary will have to pay off the mortgage, assuming full payment of it.

Read Also: Home Insurance: Why Is It Important To Insure Your Home?

Haven read till this point, I’m sure the question: Can A Mortgaged House Be Inherited? has been answered. Now that you know how to inherit a mortgaged house and the implications that this entails, it is important that you secure your equity. 

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