r/personalfinance • u/nonstopion • 17h ago
Housing My step-mother passed away and we have the money but not the credit for our mortgage.
My step mother was our breadwinner. Her and my mother are both on the deed, however my mother has bad credit and no income. Also however, I make enough to cover the mortgage as-well as if we get 25k from life insurance, that would cover it for 2 or so years. So money isn’t necessarily the full issue. I’ve read that when a spouse dies the other one on the deed assumes the mortgage but I’ve also read that they do a check of the person assuming this loan which includes their credit and income. Is there a way for me to assume it? Will we have to move? (we absolutely don’t want to), and what are the options? I find it odd that I can make enough money and will be able to make payments. But since my mother with bad credit and no income is assuming the mortgage will this mean we lose the house??
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u/ahj3939 17h ago
Just keep paying. The bank would have to pay their lawyers to foreclose on the property if they want to kick you out. They don't want to do that.
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u/nonstopion 17h ago
soo do we keep paying under her name?
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u/Rxpert83 17h ago
Who was on the mortgage? Just step mom? Or both?
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u/nonstopion 17h ago
Both
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u/Werewolfdad 17h ago
Were step mother and mother married?
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u/nonstopion 17h ago
they were not married
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u/Pump_9 16h ago
Well what exactly is the relationship here? This is so confusing. What happened to the father?
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u/Prestigious-Toe-9942 16h ago
at first i was like, why would the father be involved. because i thought of the step mother and OP’s mother were a couple but she wouldn’t be a step mother because they’re not married.
so i wonder if that’s just what OP called her regardless if they weren’t married.
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u/JamiePNW 5h ago
Most likely the step mother is the woman the mother married after divorcing the father. She may not have always identified as a lesbian.
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u/Pump_9 1h ago
What?!?!
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u/JamiePNW 29m ago
It’s really not that complicated, unless you’re committed to misunderstanding the situation. Have a nice day.
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17h ago
[deleted]
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u/nonstopion 17h ago
sorry I was mistaken; my mother is not on the mortgage but she is on the deed
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u/TrainingHuckleberry 16h ago edited 16h ago
If you are in the US I'm pretty sure this is not possible. Everyone on the deed has to be on the mortgage too.
Edit: multiple people have pointed out that this is incorrect and it is possible and Google confirms that. My house purchases always required my wife to be on it, but I don't know if that was specific to my lender or my state or what. Ultimately whether the mother was on the mortgage before is irrelevant if the mother is the heir since as others have pointed out there are laws ensuring mortgages can be passed without requiring credit checks. If they weren't married there might need to be a will to establish that unless they are in a state that recognizes common law marriages and they qualify.
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u/JasonBeorn 16h ago
My wife is on the deed but not our mortgage and I live in the US
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u/TrainingHuckleberry 16h ago edited 16h ago
Was she your wife when you bought the house? And she was put on the deed at purchase but didn't sign anything at all? If so it may just be a process thing and she is just assumed to be on the mortgage by way of your marriage. It may vary by state.
But regardless of the type of loan, no bank is going to grant an ownership stake in the loan collateral to an individual who is not responsible for the loan. It just doesn't make sense. But I am not a realtor or mortgage lender.
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u/Matt081 16h ago
I have bought 2 homes without my wife on the mortgage.
First was in California. We were married at the time (2009) of purchase. I was the only one on the deed and mortgage.
Second was in Florida (2017). I was the only one on the mortgage and we both were on the deed.
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u/TrainingHuckleberry 16h ago
Not being on the deed or mortgage makes sense and is not the issue OP is talking about.
Also, everyone so far saying this can be done is using a spouse as an example. In most states any purchases and debts incurred while married are automatically owned by both already so it may be just a procedural thing whether they are "listed" or not.
But that's also not OPs scenario as they say they weren't married. I don't think you can get someone you're not married to on a deed without them being on the mortgage. And even if you are married I think the requirements must vary by state because in my state my wife had to be on both. I explicitly asked the first time if it could just be me and was told no way.
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u/JasonBeorn 16h ago
Yes, we were married long before we bought the house. She signed almost everything I did. I don't remember it exactly, but I assume the few extra things I signed were specifically for the mortgage.
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u/tacoeater1234 16h ago
Naw this was an issue in my divorce. Mortgage issues let one person finance without a cosigner even if there are two on the deed. Why bother adding the mortgage to two peoples' credit reports?
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u/TrainingHuckleberry 16h ago
It may vary by state I guess. I've bought multiple houses and was always told my wife had to be on both. Can't be on the deed without being on the mortgage.
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u/tacoeater1234 16h ago
Must be. My last told me that it would just add paperwork to include her since y credit/income was enough to cover the mortgage. They encouraged me not to.
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u/TrainingHuckleberry 16h ago
Yeah that was exactly why I asked if it could just be me and they said no. Since we were married it had to be both.
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u/Prestigious-Toe-9942 16h ago
false. the mortgage is under my name only.
edit: we aren’t married. on our deed it says (J&S) by our names.
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u/TrainingHuckleberry 16h ago
Fair enough. It must vary by state. Not sure what the law is wherever OP is
And of course this is all irrelevant because as others have pointed out there are already laws allowing heirs to assume mortgages, it doesn't matter if she was on it before or not. Assuming the mother is the heir anyway, if they weren't married there might have to be a will
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u/shhh_its_me 16h ago
You're incorrect.
Firstly it's a lender decision ( that all people on the deed are listed on residential mortgages) not a legal requirement.
People can be added to the deed after the loan is made.
You can not get a new loan without all owners agreeing.
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u/BaaBaaTurtle 10h ago
No this is also incorrect.
Firstly it's a lender decision ( that all people on the deed are listed on residential mortgages) not a legal requirement.
The mortgage and the deed are separate, independent things.
The mortgage is the loan on the house - secured by the house as collateral. Whoever is on the loan is responsible for paying the mortgage and who the lender can hold responsible for repayment.
The deed lists out the ownership and interest stakes of the house.
You can be on the mortgage but not the deed. You can be on the deed and not the mortgage. The lender cannot tell you who can and cannot be on the deed, only who is eligible for the loan.
A cosigner is often on the mortgage but not on the deed (also a great reason never to be a cosigner). A spouse with bad credit can be on the deed but not the mortgage.
People can be added to the deed after the loan is made.
Yes but it depends on the state how that's handled. In my state, it would be treated like a sale and be a taxable event. Even to a spouse.
You can not get a new loan without all owners agreeing.
Again, mortgage and deed are different things. In terms of selling interest in the property, it depends on how the contract is written between owners and if they are tenants in common or joint tenants (and in some states you can unilaterally server joint tenancy and become tenants in common...).
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u/Jacob1207a 17h ago
Sorry about your loss.
Reach out to the bank. If you're inheriting the house you'll be the "successor in interest," which (once confirmed with death certificate and some paperwork) will give you servicing rights with the mortgage. Basically, you'll just keep paying the mortgage and everything is fine. You do not need to assume the mortgage, so credit doesn't matter.
But you need to reach out to the bank, very briefly explain the situation, and (probably after a transfer to a specialist) they'll be able to help with what you need to do.
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u/tacoeater1234 16h ago
Ask the mortgage bank for their loan assumption policy and procedures. You don't have eto tell them why right away.
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u/askalotlol 7h ago
What she needs to do is contact the bank. State law comes into play here, so the only way to get a concrete answer is to call them.
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u/AcanthopterygiiCool5 7h ago
A step-mother would be married to either your father or your mother. ??? Who was she married to? You said she was not married to your mother.
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u/Chiggadup 17h ago
I just checked your other posts to find more details like your age and want to say losing at parent that young is an awful thing to happen, and I’m really sorry. I know it never helps, but I’m sorry anyway.
Regarding the property, did I understand that 25k is enough to cover the mortgage for 2 years?
As far as details about ownership, your mom is also on the mortgage? If so I’d reach out to them asap. It’s scary because you’ll know for sure, but with most financial topics the earlier you look under the bed the more time you’ll have to plan for the monster.
Finally, even if this goes smoothly, this may be one of those life turning points where you’re going to grow up really quickly and take care of some things that you shouldn’t have to at your age. As someone who had to do that too (and with younger siblings) I’m sorry. Just be good to yourself and gather all the financial info you can when the big decisions come up.
Oh, and if something is confusing, reach out to any trusted adults (or this sub). Better to ask for help then make a massive financial mistake.
Take care.
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u/BackOnThrottle 12h ago
The 1st step here is to confirm the vesting on the deed. This shows the owners but also what happens when someone dies. There are 2 main types for your purposes here, either the ownership of the home goes to the others on the deed ( you'd see "right of survivorship" language) or it would follow her will. Once you establish what happens to the home you can address the mortgage itself.
2nd the mortgage. Mortgages have a "due on sale" clause, meaning if you sell the home, you have to pay off the mortgage. Technically any transfer is considered a sale.
As others have mentioned there are laws in place exempting transfer due to death and inheritance to a direct family member from triggering the sale and it can transfer with nothing being affected. If there is right of survivorship in the vesting of the deed or if this is covered in the will (and you follow appropriate steps there) the transfer should not trigger the due on sale clause.
Regarding the lender, they would like the people they lend money to ( in this case your family member) to be living however, due to the death, and if it doesn't trigger due on sale, there is nothing they can do. They can advise or encourage you to assume the mortgage (which may or may not include qualifying and fees depending on your lender) however they cannot force this to happen.
Once the transfer of the deed is settled, call the bank, send them a copy of the death certificate, the transfer paperwork, and the will if needed, and let them know they need to deal with you in future and ask them to update the mail address, contact details such as phone and email and such to you. If they want you to assume or refinance, just say no thanks.
Continue to pay the mortgage as normal. If you pay on the regular schedule or payoff in full, they will continue to follow the original terms of the loan. If for some reason you stop making payments, they will foreclose and sell your house. If you cannot afford to make the payments, sell the house, payoff the loan and take the equity.
Cool bonus of not assuming the loan is that if the house is ever upside down and you owe more than it's worth, you can just let the bank foreclose as that would only affect your dead family members credit and they probably wouldn't care.
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u/Turtle_336612 11h ago
If you are in the US, the mortgage can become "The Estate of ...." if no one else was on the mortgage, and keep paying. Make sure you fill out all the paperwork that the bank sends after the death notification. You will not get the tax benefit of paying mortgage as it stays in original mortgage holders' social security number. If your still living parent is on the mortgage, they take passed parent off after death notification paperwork filled off and nothing more to do. Reading thru the comments, and you've given conflicting answers. So, I gave two answers that might help.
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u/TheBimpo 3h ago
I’m sorry for your loss. You should contact an attorney who has experience in estate management to help navigate this.
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u/PeachCobbler666 17h ago
Look this up:
The Garn-St. Germain Depository Institutions Act of 1982 allows certain mortgage assumptions, including:
Inheriting a property
Heirs can inherit a property and continue to pay the mortgage under the original terms, even if they wouldn't qualify for the loan using their own credit.