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?
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.
It sounds like maybe you have more context to the situation, but I just want to say that cash-out refinancing on its own isn’t necessarily predatory or malicious.
It has a lien attached and that’ll basically ‘stick’ to the house. You can sell the house to pay off the mortgage, or get a mortgage to buy the house and pay off that other mortgage, that kind of thing, but the creditor is gonna be one of the first people in line, in terms of receiving money from any sort of sale or transfer. The creditor has the right to forgive the debt but that almost never happens even in a scenario like this
Her estate is responsible for the mortgage. You have to pay the mortgage out of whatever resources her estate has or “sell” the house to the grandkids at which point they are responsible for the mortgage. The bank has to get their money somehow. If the grandkids don’t want to assume the mortgage and the estate doesn’t have the money to pay the mortgage then you will default and the bank will foreclose and take the house to auction.
Massively depends where you are in the world.
Best guess would be the house will be sold off by the estate to close the mortgage. So unless you want the house+mortgage I doubt you will get the house.
You sure do if you want to keep the house. It also sounds like she leveraged the house for some extra cash when she refinanced.