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I inherited a home from my father with an HELOC. Can my daughter live in that home and I pay the mortgage?

by tmarie230 from , California. Aug 7th 2016 Reply


I should add that I live in Minnesota.

Aug 7th 2016
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Scott Fix (ScottFix)
#1346 ranked lender in California - 184 contributions

Great question. Now, a HELOC as you know is a home equity line of credit which s secured by the property itself. The majority of mortgage loan instruments have waht is termed an "acceleration clause" which can cause the debt to be due to the lender upon an event, such as sale, default or death. What you should do is call the lender and inform them as to your fathers death. Most times it will be required that the HELOC be satisfied by the beneficiaries of the property. See attached some articles which are easy reading. All the best, Scott. http://homeguides.sfgate.com/death-mortgage-holder-52695.html http://www.kirstenesq.com/probate/what-happens-to-a-mortgage-when-the-borrower-dies/

Aug 7th 2016
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Ray Jones (OneRay)
#897 ranked lender in California - 14 contributions

Scott is entirely correct. However, there are times when the heirs may not be able to refinance the home or would receive less favorable terms than the existing mortgage loan offers. In these cases, I have seen the heirs continue to make the monthly payments on the existing loan(s) and it seems that as long as the current lender gets their money on time each month, they do not accelerate the loan as mentioned above and things can just roll along for many years.

Aug 8th 2016
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William J Acres (William_Acres)
#74 ranked lender in Arizona - 8,728 contributions

Absolutely.. but understand for tax purposes, you basis is the value of the home at the time of inheritance.. If you sell the home in the future, then the increased value above the value upon inheritance will be subject to taxation.. Also, if you are collecting rent from your daughter, you need to claim it on your taxes.. As far as the note being called due and payable.. That would be illegal.. under the Garn-St. Germain Act, it makes it against the law to call a note due if you inherited the property.. you must continue to make the payments, and you will be subject to the terms of the original note (balloon payment, interest rate increases, etc.. ). Also, if you transfer ownership out of your name into your daughters name, then that could trigger the "due on sale" clause.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

Aug 8th 2016
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When I read about the Garn-St. Germain Law, it sounds like the surviving child would have to live in the home in order to assume it. The house is next door to mine, what I would like to do is let y daughter and her family live there, but I would be responsible for the mortgage payments. She would not be paying rent. Would this still be covered under this law?

Aug 8th 2016
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William J Acres (William_Acres)
#74 ranked lender in Arizona - 8,728 contributions

Based on the Garn-St. Germain Act, you are not required to live in the property.. here's the actual text of the law.. https://www.law.cornell.edu/uscode/text/12/1701j-3 See section D-5&6. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

Aug 8th 2016
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Scott Fix (ScottFix)
#1346 ranked lender in California - 184 contributions

Your Best Bet!! - Seek the guidance of an experienced real estate and trust attorney regarding the issue of the Garn-St. Germain Act and how it may apply to your circumstances. Also, regarding any tax questions, as you proceed, work with your accountant or tax advisor on how to proceed as well. Scott.

Aug 8th 2016
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