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House refinanced 3x (reddthat.com)

submitted 1 month ago by Spacehooks@reddthat.com to c/personalfinance@lemmy.ml

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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?

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[–] Nougat@fedia.io 26 points 1 month 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.

[–] Spacehooks@reddthat.com 9 points 1 month 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.

[–] Nougat@fedia.io 4 points 1 month 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.

[–] Spacehooks@reddthat.com 3 points 1 month 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.

[–] sugar_in_your_tea@sh.itjust.works 1 points 1 month 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.