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  • Question on assuming a mortgage in Massachusetts

    My mom is terminally ill and wants my daughter, her granddaughter, to take over her home when she passes. My daughter and her family currently live with me and would love the opportunity to start their family in the home. There is no will or trust and there is a mortgage involved. How do I advise both of them (my mother and my daughter) to go about it? Ive done a little research and found that TOD (transfer of deed upon death) is not applicable in Massachusetts. I keep reading about a federal act of St. Germaine or something that says she can assume the mortgage if she inherits it. But with no will or trust or her name on the deed how does she go about it? Any jelp or reference will be appreciated

  • #2
    Re: Question on assuming a mortgage in Massachusetts

    I wish to inform you that your mother may make a Will and name your daughter as legal heir for house. As regards mortgage your mother may make an agreement with bank whereby your daughter may agree to take mortgage along with property and bank may agree to such act. Bank generally has a right for immediate repayment of loan on death thus an agreement with bank may be required to avoid foreclosure.

    AFF

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    • #3
      Re: Question on assuming a mortgage in Massachusetts

      Originally posted by Bsquad2001
      My mom is terminally ill and wants my daughter, her granddaughter, to take over her home when she passes. My daughter and her family currently live with me and would love the opportunity to start their family in the home. There is no will or trust and there is a mortgage involved. How do I advise both of them (my mother and my daughter) to go about it?
      You advise your mother that she damned well better make a will while she still has the mental competency to do it.. Otherwise, when she dies without one, her estate will go to you and any siblings you have.

      Mortgage companies generally don't foreclose upon the death of the borrower as long as the payments continue to be made.

      However, cooperation by the mortgage company will be practically non-existent because the successor owner will not be the original borrower and mortgages, for the most part, are no longer assumable in the US.

      The successor owner would have to qualify for a new mortgage on their, which might not be too difficult if there is considerable equity in the property.

      Originally posted by Bsquad2001
      Ive done a little research and found that TOD (transfer of deed upon death) is not applicable in Massachusetts.
      That's right.

      Originally posted by Bsquad2001
      I keep reading about a federal act of St. Germaine or something that says she can assume the mortgage if she inherits it.
      What the Garn-St Germaine Act does is prohibit the activation of a "due on sale" clause in the event of the death of a borrower and the inheriting of the property.

      The Act also provides that "a lender is encouraged to permit an assumption of a real property loan." Note the word "encouraged." That means that the lender is not required to do so.

      Originally posted by Bsquad2001
      But with no will or trust or her name on the deed how does she go about it?
      Without a will, or a trust, or her name on the deed, your daughter DOESN'T go about anything.

      You inherit the property under intestacy and you get to make the payments or qualify for a new loan. If you have no siblings you are free to deed it to your daughter and she can get a new loan as, by then, the "due on sale" clause might be an issue. If you have siblings you can almost bet that dividing the property among them will be an issues.

      The choices for your Mom:

      1 - Make a will naming your daughter to inherit her property and nominating either you or her as executor. The disadvantage there is that the will has to be probated for the estate to be able to sign over the property. Probate can be complicated and expensive.

      2 - A revocable living trust where the property is deeded to the trust, your daughter is beneficiary, and you the trustee and she the contingent trustee. A trust is a private contract and, by law, a simple matter to deed the property from the trust to the beneficiary. The disadvantage is that trusts often cost more money to set up properly, maybe $1000 to $2000 depending on the amount of the estate and how much is involved where wills can be drawn up by an attorney for only a few hundred. You can call around to attorneys for prices.

      3 - Deed the property from herself to herself and your daughter as joint tenants with right of survivorship. Your daughter automatically becomes the full owner at the moment of your Mom's death. No probate. Can probably get the deed form online for nothing and record it for about $20.

      Now go to the following website for all the reasons why it's a bad idea to do that:

      6 Reasons Not to Put Your Child’s Name on the Deed to your House | Wills For Working Families

      4 - Do nothing. Die intestate. The estate will have to go through an even more complicated and expensive probate. Relatives will come out of the woodwork for a piece of the pie.

      Whatever your Mom decides to do, she should do it NOW. Death can come at any moment and you don't get a reprieve just because you didn't do your paperwork. My younger brother died of a sudden heart attack at the age of 61. One afternoon he was out shopping with his wife, an hour later he was dead on the ground.

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      • #4
        Re: Question on assuming a mortgage in Massachusetts

        Nice answer! Very helpful.
        I have a similar issue.

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        • #5
          Re: Question on assuming a mortgage in Massachusetts

          Wow, thanks for the valuable information. Here is some more info on my situation. My mother has no other assets other than a $10k life insurance policy to help pay her funeral expenses, her furniture, and a used vehicle. The home has a 150k mortgage and values at about 180k. I have no siblings. Was trying to avoid my daughter applying for a mortgage as she recently graduated college, married, and had a child. Has about 35k in school loans, a car payment, a 650 fico score and only around 10k in savings. Currently they live with me. Cost for a trust or will is not an issue. I am willing to pay for the proper documentation whether its a will or trust just not sure which choice is best.

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          • #6
            Re: Question on assuming a mortgage in Massachusetts

            Originally posted by Bsquad2001
            My mother has no other assets other than a $10k life insurance policy to help pay her funeral expenses, her furniture, and a used vehicle.
            Good.

            Originally posted by Bsquad2001
            The home has a 150k mortgage and values at about 180k. .
            Not so good. Borderline loan to value for refinance these day. To refinance 150k you would have to add about 5k in points and origination fees or pay cash for them.

            Originally posted by Bsquad2001
            I have no siblings.
            Then you would inherit under intestacy but would still have the expense and hassle of probate.

            Originally posted by Bsquad2001
            Was trying to avoid my daughter applying for a mortgage as she recently graduated college, married, and had a child. Has about 35k in school loans, a car payment, a 650 fico score and only around 10k in savings.
            That and the loan to value issue I think would make it impossible for her to qualify for a mortgage. But here's an idea. Have your daughter and her husband go to a bank and apply for a mortgage of 150k based on buying a house for 180k. They can tell the bank they are looking in the 180k price range and want to see if they qualify for a loan of 150k. Should be obvious that they don't mention Grandma's property. Right?

            Then they'll know where they stand with potentially refinancing some time in the future.

            Originally posted by Bsquad2001
            Cost for a trust or will is not an issue. I am willing to pay for the proper documentation whether its a will or trust just not sure which choice is best.
            A trust is way better and for just one property I bet you can get one done for well under $1000. Call around to a couple of lawyers for prices.

            I don't know what kind of financial shape you are in but if you can handle the payments on a second home with some contribution from your daughter, I think the best route is for the trust to name you as beneficiary and trustee (successor to your mother). Once your mother passes, the trust can continue to own the property, the mortgage can continue to be paid, and your daughter and her family can live in it until she can qualify for a refinance and then you can sell it to her.

            The advantage that way is that you have some control over things in case something in your daughter's life goes wrong (divorce - it happens, financial problems, etc). If she inherits, she is more likely to lose the house if something goes wrong.

            As always, discuss all this with an attorney.

            Comment


            • #7
              Re: Question on assuming a mortgage in Massachusetts

              Originally posted by Unregistered
              Nice answer! Very helpful.
              I have a similar issue.
              Then start another thread with your details.

              Comment


              • #8
                Re: Question on assuming a mortgage in Massachusetts

                One point of correction. Federal lending laws have made the original mortgage company liable to continue under the same agreement with the estate and successor owner, according to the same terms as long as all terms of the mortgage continue to be made in a timely manner. This change in law happened for the reason above, where many people inheriting a property did not have the credit to swing a refinance on short notice.
                Due to a recent promotion, I should now be referred to as Major Obvious.

                I would not be trying to provide information and knowledge if I did not sympathize.

                Some days it is just not worth chewing through the restraints to face life.

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                • #9
                  Re: Question on assuming a mortgage in Massachusetts

                  Originally posted by Disagreeable
                  One point of correction. Federal lending laws have made the original mortgage company liable to continue under the same agreement with the estate and successor owner, according to the same terms as long as all terms of the mortgage continue to be made in a timely manner. This change in law happened for the reason above, where many people inheriting a property did not have the credit to swing a refinance on short notice.
                  Did I miss that in Garn - St Germaine or did that come later? If it came later can you provide a link to it.

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                  • #10
                    Re: Question on assuming a mortgage in Massachusetts

                    Originally posted by Disagreeable
                    One point of correction. Federal lending laws have made the original mortgage company liable to continue under the same agreement with the estate and successor owner, according to the same terms as long as all terms of the mortgage continue to be made in a timely manner. This change in law happened for the reason above, where many people inheriting a property did not have the credit to swing a refinance on short notice.


                    I also would like to to see the law on that. I was not aware it was that strong?
                    Still can't find it either. But it would help me if true.

                    Comment

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