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I am wondering if the mortgage company can change the terms of the mortgage once I am responsible for the payments. Thanks.

4 Thoughts on My father is leaving me his home in a life estate. Will I pay the current mortgage monthly payments?
  1. Reply
    Glenn S
    January 26, 2014 at 2:02 pm

    No

    Property in a Life Estate cannot be transferred or sold to another person. Upon the death or abandonment by the life estate holder (your father) the property returns to grantor (or heir) of the life estate.

  2. Reply
    Dan B
    January 26, 2014 at 2:43 pm

    Good question. They may require to you qualify for the mortgage, but that would violate your father’s wishes if you can’t qualify. Since the lender has no other interest than getting their investment back (the mortgage), they probably couldn’t care less about your father’s wishes.

    My question would be if your father can leave you the home in a life estate with a mortgage on it. Check the mortgage documents to see if there’s a restriction on that. I would expect some kind of restriction. This would in effect become an assumable mortgage and lenders haven’t written them since the 1970 or early 1980s.

  3. Reply
    efflandt
    January 26, 2014 at 3:26 pm

    It would be a good idea to check with an estate attorney to see if it is possible or the best option from a tax perspective. It is possible that a due on transfer clause in the mortgage documents would make the loan immediately due and payable if he deeded it to you now with life estate for him.

    There will also be a matter of homeowners insurance required by the lender. He could not get it if he does not own it, and if your name is on it, the lender may ask questions.

    Tax wise if you acquire it now and then want to sell it after his death, there may be capital gains (if the real estate market picks up). But if you inherit it, cost basis is stepped up to fair value at time of death, so there would be no capital gain at that time.

  4. Reply
    SwimBod
    January 26, 2014 at 4:16 pm

    it cannot be transferred.

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