You Inherited A Home That Has A Mortgage, Who Owns The Home?
This guide discusses the options that are available to you when you inherit a home with a mortgage. Does the bank own the home because of the mortgage, will you be responsible for the mortgage, can you sell the home?
Florida Lien Theory StateFlorida is a lien theory state, which means that when a mortgage is provided to purchase a property then a lien is placed on the property until it is paid off, the property is sold and the proceeds from the sale cover the mortgage, or the bank forecloses on the property. When you inherit property you also inherit a deed to the property.
The deed signifies that you are the true owner of the property and have the right to: will the property, sale the property, place a mortgage on the property, or rent the property. Although you may be the owner of the property through the deed, there is still a valid lien on the property because the mortgage exist.
Negotiate With The BankThe lien on the property placed by the bank because of the mortgage does not disappear because you inherit the property by a will. Reversely, you are not responsible for the mortgage on the property, unless you signed the mortgage when it was first being created. The bank only recourse is to file a foreclosure lawsuit in court. If your credit is good, then you can negotiate with the bank to take over the remaining balance with a new mortgage signed by you.
Sell The PropertySelling the property can be a viable option if you are not interested in keeping the property and the value of the property more than covers the remaining balance of the mortgage. As the owner of the property you have the right to sell the property any time you chose even with a mortgage. However, the proceeds from the sale must cover the mortgage so it can be a viable option to you.
For example, you inherit a 3 bedroom 2 bathroom house that will sell on the market for 300,000. But the property has a mortgage for 150,000, in this case once the property is sold the proceeds from the sell will pay off the mortgage and leave you with a profit of 150,000. But, if the same property would sell for 130,000; then there would still be a balance on the property for 20,000, you would no longer own the house but you would not be responsible for the remaining balance on the mortgage because you were not the original signer to the mortgage.