Q: Since I owe a large sum on my house; when I die, can my adult children just 'give the keys' to the mortgage company ?
I hope my adult children would not have to pay off my house
A: Good question. Heirs do not have to personally pay off any debts of a deceased relative. The Personal Representative ("PR") is appointed to deal with the assets and debts of the person who died and must pay off debts from the deceased person's assets.
Three options usually exist when someone dies with a house encumbered by a mortgage. First, the PR might sell the house, in which case the mortgage gets paid at closing and any proceeds become a part of the estate. Second, the PR might distribute the house to heirs. However, a mortgage attaches to property so if the heirs get a house with a mortgage the loan doesn't go away and the heirs would obviously need to pay the mortgage. Third, if neither of the first two options made sense a PR could try to negotiate with the lender to do something called a "deed in lieu" which means the owner gives up the property rather than go through foreclosure. A mortgage lender is not obligated to accept the title to the house and there is no guarantee that the lender would agree to do so. A lot depends on the value and condition of the house and the other available assets. The PR should not distribute any assets until the mortgage is resolved one way or the other.
Ordinarily people need to pay off the mortgage in full when a property title transfers. However in the case of inherited property a federal law allows family members to continue paying the mortgage in the ordinary course.
While not legal advice, I hope this general information helps address your posted question.
A: Assuming you are the only name on the deed, the house becomes "property of the estate" upon your death. Your "just debts" must be paid out of the assets in the estate, and that includes the mortgage. Your heirs may be able to refinance the mortgage so the house is not sold to a third-party. Mortgage companies are not in the practice of taking keys-- they don't want to own property.
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