This is the next article in our series on property inheritance and probate procedure in Oklahoma.  In the last article, we talked about the Oklahoma probate process and the key steps involved in it.  In this article, we will discuss a scenario where a parent leaves you a mortgaged home through a testamentary instrument or intestacy laws.

Trying to handle estate matters while grieving is emotionally challenging.  The whole process can seem daunting and confusing.  Having competent legal counsel to assist you in navigating the trenches can make a world of difference.  If you seek to hire legal counsel, we are here to help.  Please contact us online or by telephone to get in touch with an estate planning firm to speak to a probate attorney.

Inheriting a house with a mortgage from a parent: what are the things to consider?

Upon a parent’s passing, the mortgage tied to the property does not go away.  It will stay with the property until fully paid and potential foreclosure looms if the payments stop.  Most mortgages have a “due on sale” clause, meaning that the entire mortgage is due if the ownership interest is changed.  However, a Federal law, The Garn–St. Germain Act., protects heirs making the “due on sale” clause unenforceable in transfers resulting from the borrower’s death.  So if you inherit a house from your parent, the mortgage company will likely give you the option to continue making payments or take over the loan by assuming the mortgage.

Inheriting a house from a parent can come with its complexities and nuances.  Let’s discuss a few different scenarios:

If the parent dies without a will leaving you as the sole heir, for example, then the house will pass to you under Oklahoma intestate laws. But before this happens and depending on its size, the estate must go through a probate proceeding – where a court-appointed administrator must handle the estate business.  In most instances, the administrator is also an heir.  After the proceeding, you (or you jointly with another heir) will become the title holder of the house.  You can then notify the mortgage company that you are the successor in interest.  Most mortgage companies will add you as a contact allowing you to continue making payments. Depending on the financial institution, they may also allow you to assume the mortgage.

Whereas, If you inherit the house from your parent through a will, then the estate depending on its size will likely go through a probate proceeding.  This process is straightforward and statutorily driven.  After the probate, you will have the rightful title to the house; at this point, you may decide to continue mortgage payments on the existing loan or assume the mortgage. As long as you are making the payments, most lenders will allow you to do either. Conversely, you may elect to satisfy (pay off) the mortgage with the additional assets of the estate.

Similarly, If you are a beneficiary under a living trust, then the trustee oversees property disposition in line with the parent’s wishes.  Where the inheritance includes a house with a mortgage, you can notify the lender that you are the successor in interest and would like to continue making payments.  Or, as discussed earlier, you can also take over the loan by assuming the mortgage. Suppose the trust instrument has provisions for paying the mortgage from the trust property. In that case, the trustee will have the duty to utilize the trust assets to satisfy the mortgage and dispose of the property in accordance with the trust instrument.

Finally, If the house is owned by you and a parent in a joint tenancy with the right of survivorship, then the property is conveyed to you at the time of your parent’s death.  You must create a public record of this transfer by filing an affidavit of a surviving joint tenant under the property records.  This can be done by filing the affidavit along with a certified death certificate with the county clerk in the county where the property is located.  Most mortgage companies require this affidavit along with the heir’s identity and a death certificate to establish you as a successor in interest.  After that, you may continue making payments without assuming the mortgage or agree to assume the mortgage.

What steps to take when inheriting a house with a mortgage from a parent in Oklahoma?

First, determine the transferring instrument, whether it is through a will, trust, joint tenancy, or will pass through intestacy.  Houses inherited through a will or through intestacy must go through a probate proceeding, where the executor or a court-appointed administrator handles the estate business.  If the title of the house is conveyed to you at the end of the proceeding, then you get the house.  But it comes with the mortgage unless your parent had made provisions in the will to pay off the mortgage from the estate; if so, then the mortgage will be satisfied using assets of the estate, and you will get the house mortgage-free.  A house inherited through a trust or a joint tenancy avoids probate and is transferred to you directly.

Second, contact the financial institution that has a mortgage interest in the house and notify them that you are the successor in interest.  They will likely request documents such as court documents showing the qualified legal representative or successors, state identification (driver’s license), and proof of death.  If the house was held in joint tenancy by you and your parent, then the mortgage company may request an affidavit of a surviving joint tenant.  After the submission of the requested documents, you will be named as the contact person on the loan and you may continue making payments without any problem.

Third, if you would like to take over the loan altogether, you can do so by assuming the mortgage.  This can be done by contacting the mortgage company and making such a request  and then they will help transfer the loan to you.  If you are unable to assume the mortgage, some lenders may even let you refinance the loan to either extend the terms or lower the rate – which could result in a reduction of the monthly payments.

OKC Estate Planning lawyer and Probate Law Firm

Inheriting a house with a mortgage involves navigating legal complexities.  If you are in the midst of this whirlwind and are seeking legal counsel, we are here to help.  We will help you navigate through these tough times as you heal from the loss of a loved one.  If you have inherited or will be inheriting real property after the death of a parent and are overwhelmed by the process, contact us today.  Get in touch with us online or by telephone to speak to an estate planning and probate lawyer.  We proudly serve Oklahoma, Logan, Cleveland, and Grady County.