When Julianna received the call from her late uncle’s probate lawyer, she was surprised to learn he had left her his charming ranch home in Coral Springs, Florida. But the news was bittersweet, because the house still had a large mortgage. Julianna liked the idea of owning a second home she could use for vacations, but she already had a mortgage on her official home and hadn’t anticipated the responsibility of owing money on two.
Julianna felt overwhelmed by the questions swirling through her mind: What to do if I inherited a house with a mortgage in Florida. What are my legal requirements under the state’s real estate law, and how will this impact my financial future?
As an experienced real estate attorney, our firm often counsels individuals throughout South Florida in situations similar to Julianna’s. Complicating matters, the financial repercussions to inheriting a home with a mortgage generally come at a time people are grieving the death of a beloved family member.
The boutique law firm of Gary M. Landau, P.A. in Coral Springs, Florida, recognizes that inheriting a home can be a source of joy but also an obligation. This blog, from a knowledgeable real estate lawyer, delves into what you need to know when inheriting a house with a mortgage in Florida.
Continue reading to learn more, then contact the Law Office of Gary M. Landau at (954) 979-6566 to schedule your free consultation by phone, in person, or on Zoom. We serve Coral Springs, Deerfield Beach, Parkland, Pompano Beach, Boca Raton, Lighthouse Point, Fort Lauderdale, Hallandale Beach and all of South Florida.
According to Florida Law, Who Is Responsible for the Payments When Inheriting a House With a Mortgage?
Given that Florida is a popular place for retirees and snowbirds along with families of all ages and stages, many people own property in the state, which means inheriting a home with a mortgage is quite common. But who is entitled to the home’s ownership after someone dies and who is responsible for its debt depends on how the deed was structured, whether it was the deceased person’s primary residence, and if they created an estate plan while they were alive.
If the title to the home was held solely in the name of the deceased person, the house becomes part of their estate and is subject to probate proceedings. It’s important to note that during the probate process, before the house officially passes to beneficiaries, monthly mortgage payments should be paid by the personal representative, ideally from money in the estate bank account if enough remains there. If the decedent did not have a last will and testament, the heirs generally choose who will be the personal representative, or the court can appoint someone to this role.
If instead the house was jointly owned by the deceased and another person, typically the surviving spouse or sibling, with the deed decreeing them as having “joint tenancy with rights of survivorship,” that person becomes the sole owner of the property. In this circumstance, the surviving homeowner becomes responsible for continuing to pay the mortgage.
If the property was the person’s primary residence, Florida law grants specific rights to the surviving spouse or minor children. These “homestead” laws provide for ownership rights for these individuals, even if the person’s will designates a different beneficiary for the home.
It is important to consult an experienced real estate attorney to understand your legal obligations and rights when a home is left to you in someone’s will.
An Inherited House and Heirs’ Responsibilities
Whether you plan to keep a house that is bequeathed to you or, especially if you plan to sell it, there are steps you should take once it is clear someone has left their property to you.
- Continue Making Mortgage Payments Federal law requires lenders to allow family members to assume a mortgage on inherited property. Each month that you own the home you must make a mortgage payment in full and on time to avoid defaulting on the loan and facing foreclosure. If necessary, seek guidance from an attorney or financial planner on how best to handle these payments.
- Pay Property Taxes, Maintenance, and Homeowners Insurance. Part of the obligation of owning a home includes property taxes, homeowners/condo association maintenance, and insurance. Failing to fulfill these obligations can result in a lien or high expense. (For example, every home with a mortgage is required by the lender to stay current on insurance or they may purchase a policy for you.) With the increased number of hurricanes in Florida, it’s also wise to have flood insurance, which is generally purchased separately. The importance of flood insurance was made clear to one of our law firm’s recent clients when she inherited a home that was almost immediately damaged by flooding from Hurricane Milton.
- Keep the Home in Good Condition. During the period before the probate is finalized, the home may be unoccupied. Still, you’ll want to ensure the grass is cut and the exterior and interior properly maintained. Of course, this maintenance should continue once the property’s title passes to you, especially if you plan to sell it.
Impact of Estate Tax on Inherited Properties
In addition to dealing with the mortgage and other debts, in some cases there may also be estate tax liabilities if you inherit a house in Florida. Estate taxes are federal taxes imposed on the transfer of property after death. The vast majority of inherited properties will not be subject to these taxes.
However, if the total value of the person’s estate exceeds $13.61 million (as of 2024), their beneficiaries may be responsible for paying estate taxes on the excess amount. Consult an estate attorney who can help you understand your potential tax liabilities and plan for them.
What Happens When There Are Other Heirs?
Multiple people can inherit a house. For example, a person may leave their home to several of their grown children. Or in cases where there is no will and no living spouse, the courts typically grant equal ownership to all the person’s grown children. Of course, this means the mortgage and other costs are shared equally as well.
Problems often arise when one or more of the new owners wants to sell the home while others want to keep it. To avoid complications, all parties should communicate openly and work together towards a mutually beneficial solution. This may involve selling the property and dividing the proceeds equally or coming up with an agreement for one party to continue living there and assume ownership and responsibility for the mortgage.
Consider Your Options: Sell, Keep, Refinance, or Rent?
Option 1: Assume the Mortgage
When inheriting a house with a mortgage in Florida, one option is to assume the existing loan. In this case, you, as the new owner, agree to take over the remaining balance and continue making mortgage payments. If the interest rate and terms of the loan are favorable and you plan to keep the property, this is often the best approach.
Option 2: Refinance
Another option is to refinance the inherited mortgage, which involves taking out a new loan in your name to pay off the existing mortgage. Depending on the interest rate of the original loan, refinancing may allow for lower monthly payments or different terms that better suit your financial situation. Keep in mind that refinancing can incur fees and closing costs.
Option 3: Rent the Home
If you plan to keep the inherited property but not to live there full-time, renting it either short-term or long-term can generate income and cover at least some of the mortgage payments. This option requires a deep understanding of the responsibilities of becoming a landlord, such as finding tenants, managing the property, and complying with landlord-tenant laws. If you want to operate the property for short-term rentals, such as on AirBnB, you’ll need to evaluate whether the homeowners/condo association and local laws allow for that.
Option 4: Sell the Property
Many people who inherit a home, especially one with a mortgage, choose to put the house up for sale. If there is equity in the home, this provides you with money and eliminates the burden of mortgage payments.
Consult a real estate attorney for guidance on navigating the sale process. And remember that until the deal closes, you are still responsible for paying the monthly mortgage and other upkeep costs.
Seek Professional Guidance from a Knowledgeable Real Estate Lawyer in South Florida
Inheriting a house with a mortgage can be overwhelming, especially if you’re unfamiliar with the legal and financial aspects involved. That’s why it helps to seek guidance from a reputable South Florida real estate lawyer who can advise you on the best course of action for your situation.
A knowledgeable real estate lawyer can help you navigate the realities of inheriting a property with a mortgage. With their guidance and support, you can make informed decisions that will benefit your current and future financial well-being.
Protect Your Assets & Explore Your Options with the LAW OFFICE OF GARY M. LANDAU, P.A.
Have you inherited a house in Coral Springs, Boca Raton, Fort Lauderdale, Deerfield Beach, Pompano Beach, Miami-Dade County or elsewhere in South Florida?
With more than 25 years of experience in our practice areas and countless satisfied clients, Gary M. Landau and his team are uniquely positioned to help you with your probate and real estate needs in Coral Springs, Parkland, and throughout Florida. Whether you’re ready to probate a loved one’s estate or to write your own will, or if you are purchasing a home, have inherited a home, or want a closing agent to handle title insurance and all documents for your closing or refinancing, the LAW OFFICE OF GARY M. LANDAU, P.A. is ready to work with you.
Call our office at (954) 979-6566 or complete our online form today to schedule a free consultation. We work with our clients in person, over the phone, or on Zoom.
Copyright © 2024. LAW OFFICE OF GARY M. LANDAU, P.A. All rights reserved.
The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction.
LAW OFFICE OF GARY M. LANDAU, P.A.
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Coral Springs, FL 33067
(954) 979-6566
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