Debunking the Myth: Why Walking Away from an Inherited House with a Mortgage in Illinois Is a Mistake
Inheriting a house can be a bittersweet experience, especially when it comes with a mortgage. Many people in Illinois mistakenly believe they have to either take on the responsibility of the mortgage or walk away from their inheritance. This myth has led to countless heirs missing out on claiming life-altering assets. Let's debunk this misconception and explore the truth about inheriting a property with a mortgage in Illinois.
The Myth: "I Have to Take on the Mortgage"
A common scenario: Your father passes away, leaving you his house in Illinois. You discover there's still a mortgage on the property. Worried about taking on this financial burden, you decide to walk away from the inheritance. This decision, while seemingly logical, is based on a misunderstanding of how inheritance and mortgages work.
Many people believe that inheriting a house with a mortgage means they're obligated to take over the loan payments. This fear often leads to hasty decisions that can result in significant financial losses[1].
The Truth: Your Rights and Options as an Heir
Contrary to popular belief, inheriting a house with a mortgage doesn't automatically make you responsible for the debt. Let's break down the reality of the situation:
The Garn-St. Germain Act and Its Implications
A crucial piece of legislation that protects heirs is the Garn-St. Germain Depository Institutions Act of 1982. This federal law prevents lenders from enforcing the due-on-sale clause when a property is transferred to a relative through inheritance[1]. In simpler terms, the bank can't demand immediate full repayment of the mortgage just because ownership has changed hands.
Options for Dealing with an Inherited House
As an heir, you have several options when inheriting a house with a mortgage:
1. Assuming the Mortgage: You can choose to take over the existing mortgage and continue making payments. Thanks to the Garn-St. Germain Act, you have the right to assume the mortgage under its original terms[1].
2. Selling the Property: If you don't want to keep the house, you can sell it. The proceeds from the sale can be used to pay off the remaining mortgage, with any excess going to you as the heir[1].
3. Refinancing: If the inherited property has equity, you might consider refinancing the mortgage to potentially get better terms or lower payments.
Importance of Professional Legal Guidance
Given the complexities of inheritance law and the potential financial implications, it's crucial to seek professional legal advice. An experienced attorney can guide you through the process, help you understand your rights, and assist in putting the inherited property in your name.
Next Step
Are you dealing with an inherited property in Illinois? Don't make hasty decisions based on misconceptions. Contact Deranian Law Group LLC for expert guidance on navigating inherited property matters. Our experienced team can help you understand your options and make the most of your inheritance. Schedule your free consultation call here, and take the first step towards making an informed decision about your inherited property.
Citations:
[1] https://www.bankrate.com/mortgages/inheriting-a-house/
[2] https://bc-firm.com/inheriting-a-house-illinois-law/
[3] https://www.houzeo.com/blog/selling-inherited-property-illinois/