this post was submitted on 29 Sep 2024

35 points (94.9% liked)

Personal Finance

3861 readers

46 users here now

Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. Join our community, read the PF Wiki, and get on top of your finances!

Note: This community is not region centric, so if you are posting anything specific to a certain region, kindly specify that in the title (something like [USA], [EU], [AUS] etc.)

founded 2 years ago

MODERATORS

[email protected]

House refinanced 3x (reddthat.com)

submitted 3 months ago by [email protected] to c/[email protected]

25 comments fedilink hide all child comments

My grandmother bought the home we lived in the 90s for 90k at a 8% interest rate. I found out she refinanced the house several times from what seems like predatory practices and malicious advice and now owes 250k at 6%. Basically the house I thought was paid off now has 30 mortgage and she is 90. Her grandkids are in the will to inherent the house but do we inherent this mortgage?

all 27 comments

sorted by: hot top controversial new old

[–] [email protected] 25 points 3 months ago (2 children)

In the US:

When you pass away, your mortgage doesn’t suddenly disappear. Your mortgage lender still needs to be repaid and could foreclose on your home if that doesn’t happen. In most cases, the responsibility of the mortgage will be passed to the beneficiary of the home if there is a will.

https://www.bankrate.com/mortgages/what-happens-to-mortgage-when-you-die/

This partially depends on how much the house is worth now. If it's somehow a million dollar house today, and the amount owed is $250K, then you could refinance that and make payments. This would be a reasonable transaction.

But if you have negative equity - if you owe more than the house is worth - the best thing to do right now is stop paying that mortgage. In the short term, you're just throwing money away, because that mortgage is never going to be paid off. In the longer term, see the above. Stop paying the mortgage.

Yes, this will end in foreclosure. Yes, you'll "lose the house," but honestly, it was lost a long time ago, you just didn't know it. Once the foreclosure has happened, your grandmother will be relieved of that debt, because the home was collateral. Foreclosure is highly likely to happen anyway after your grandmother passes, but then it becomes infintely more complicated, especially if there are multiple beneficiaries of the property.

My in-laws were in a similar situation long ago. They had gotten a now-illegal "reverse amoritization mortgage," which basically guaranteed that their mortgage payments would always be less than the interest accrued. Same kind of result: they owed way more on the house than it was worth, way more than they had originally borrowed, and were essentially never going to get out from under it. The advice they took was exactly as above. Stop paying the mortgage.

[–] [email protected] 9 points 3 months ago (1 children)

I think you hit the nail on the head. She lost it and we just didn't know. My siblings want to put higher payments in to pay off faster but I just want to sell. I'm so burnt out over this. So many Year of paying rent just to start over.

[–] [email protected] 4 points 2 months ago (1 children)

I'm afraid this is going to get a lot worse before it gets better. Any time someone passes and leaves an estate, there's a strong opportunity for beneficiaries and interested parties to get into some serious conflicts. Your grandmother hasn't passed, and there's already conflict starting.

If your grandmother does not want to (or "isn't allowed to") walk away from the house and its mortgage (while living literally rent free until the foreclosure process goes through), you are going to need to protect yourself. You should start planning that now. Speak to an estate attorney now, and figure out what you need to do to make sure that you personally are able to reject being a beneficiary of the house, hopefully without also having to turn down beneficiary status on anything else. Maybe there's a way that you can have your "share" of the property divided equally among the other beneficiaries as a gift?

No matter what happens, you're going to have to personally "let go" of some proceeds of the estate, and you'll need to do it without holding a grudge against your siblings.

[–] [email protected] 3 points 2 months ago

I read enough best reddit updates to know the evil comes out at funerals. My youngest brother is already acting indecisive and I think he knows no matter what choice he sides with he will get a grudge from someone. Hard for me to keep composed. Ok so step one ill go speak estate attorney and see what the best course of action for me. I rather not lose my share for free but maybe I never had a share in reality. I'm hoping my grandma doesn't pull another one over us again. She keeps saying she will fix this. She notorious for her impulsive actions.

[–] [email protected] 1 points 2 months ago

Yeah, I think this is lawyer territory. FIgure out the actual value of the property and the terms on the loans before forcing the creditors to foreclose. It could be that she signed in some additional collateral beyond the house, which may or may not be legal, and getting a Real Estate attorney involved would probably be the best course of action.

But yes, take care of this before she passes ideally so you know what you're in for.

[–] RunningInRVA 19 points 3 months ago (2 children)

Her estate is responsible for the mortgage. You have to pay the mortgage out of whatever resources her estate has or “sell” the house to the grandkids at which point they are responsible for the mortgage. The bank has to get their money somehow. If the grandkids don’t want to assume the mortgage and the estate doesn’t have the money to pay the mortgage then you will default and the bank will foreclose and take the house to auction.

[–] [email protected] 3 points 3 months ago

The grandkids can buy the house at that bank auction. (Although they could be outbid, naturally.)

The estate would still owe the difference, and may be insolvent due to that, but the grandkids would not owe that difference / have to assume the mortgage.

Assuming the estate is in debt and loses money on the house, the bank may be more involved in other aspects of the estate. For example they may want items of value (eg: jewelery) to also be sold at auction rather than gifted to heirs.

Just saying that you may wish to pick your battles.

[–] [email protected] 1 points 3 months ago (1 children)

Would there be any advantage to convincing her to sell before her passing? Im assuming the remaining balance of the sale would go to us anyway?

[–] RunningInRVA 4 points 3 months ago* (last edited 3 months ago) (1 children)

I would not let the house go to auction. That will be the least advantageous. Having her sell now means that she has to have the balance of the mortgage available at closing to pay down the loan. That would of course reduce the value of her estate and then it’s less going to the grandkids or whoever. Whether she or her estate sells when she is alive or afterward is likely moot. She still owes the bank the balance of the mortgage no matter what.

[–] [email protected] 1 points 2 months ago

Ok going to auction is the worst possible option. I'll make sure to make that clear to everyone. Appreciate the help.

[–] slazer2au 15 points 3 months ago (1 children)

Massively depends where you are in the world.

Best guess would be the house will be sold off by the estate to close the mortgage. So unless you want the house+mortgage I doubt you will get the house.

[–] [email protected] 1 points 3 months ago

Which means basically we take on what was agreed on the balance with probably a different interest rate?

[–] CrimsonMishaps 11 points 3 months ago (2 children)

You sure do if you want to keep the house. It also sounds like she leveraged the house for some extra cash when she refinanced.

[–] tburkhol 9 points 3 months ago (1 children)

That's not necessarily a bad strategy, either. Most people, their home is their major asset, but you can't really access that value to buy groceries in retirement. Take money out on a new mortgage on the inflated value of the house, buy groceries and pay mortgage with that money, and move in with the kids when/if the money runs out. The bank will take the house in the end, but leaving nothing to the heirs may be better than spending your last years living in your kid's basement. The whole 'reverse mortgage' industry has grown up around just that plan.

[–] [email protected] 2 points 3 months ago (1 children)

Though she didn't needed to do that. her daughter and adult grand kids live with her. I dk why she did this. We all have jobs. There wasn't a time she wasn't getting rent from multiple people.

[–] [email protected] 5 points 3 months ago (1 children)

Do you know where the money went? Sounds like there's a couple hundred grand in cash floating around out there.

[–] [email protected] 1 points 2 months ago

I don't and while I want to grill her to find out my siblings don't want to push the issue. Like we are doing math and maybe we can account for 100k if she paid top dollar for anything. The rest we don't have a clue.

[–] [email protected] 3 points 3 months ago

The location cannot be beat. My brothers don't want to sell because of it. The main issue is while the older grandkids like myself were already looking for a new place the younger ones like my sister (20 years younger) than me have no place to go. I can't afford to bring them with me even if they wanted to. I dk why she needed more cash. I literally paid for a new roof and add ons over the years.

[–] lemmyman 4 points 3 months ago (1 children)

It sounds like maybe you have more context to the situation, but I just want to say that cash-out refinancing on its own isn't necessarily predatory or malicious.

[–] [email protected] 2 points 3 months ago (1 children)

I just can't fathom why she would need to do this. She was getting rent from mutiple people. "This came up because we're all like sooo the house is paid off this year right? So rent can go down?" I was planning write her a check for w/e balance is left just to wrap it up this year. Like I can only believe she was scammed somehow. She's An old lady with 2nd grade education (no joke) and not a good speaker.

[–] lemmyman 1 points 3 months ago (1 children)

Is there any evidence the money was used inappropriately or stolen? How was she paying her living expenses? How confident are you that she shouldn't have needed the cash just to live?

[–] [email protected] 2 points 3 months ago

Discussing this with my siblings I don't know why she would need money to live when we lived with her and people are paying her rent. Her kids and grand kids have degrees. Going to a bank for money and not just asking us more seems like madness. However, she does take frequent trips to the old country that she claimed was being paid for by her siblings. she maybe have more skeletons than we thought.