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What do I do if a loved one, like a parent, passes away and they are behind on their mortgage and their home is in foreclosure?

Posted by Katherine R. Kyle | Oct 28, 2021 | 0 Comments

What do I do if a loved one, like a parent, passes away and they are behind on their mortgage and their home is in foreclosure?

First of all, the bank has to be paid to stop the foreclosure.  However, in order to do this, you will need to probate the estate to gain legal ownership of the home.

You will not want to invest money in the property or send money to the lender prior to ownership of the property.  You can probate the estate yourself or you can hire an experienced probate attorney to handle this for you.  The average cost to probate an estate is $2,500.  However, probate can cost considerably less or considerably more depending on the amount of assets the individual had that need to be probated.  In cases where the home is the only asset to probate, this process will probably only take one to three months to complete.  Although, probate can take a considerably longer amount of time depending on the unique circumstances of the probate estate.

The two majors ways many of our clients handle a home in a foreclosure estate case is they either sell the home, pay off the mortgage, and keep the remaining funds from the sale or they refinance the mortgage loan to keep the property.  You will be unable to sell or refinance until the probate case is concluded and the property has been retitled for you to gain ownership of the home.

If you have siblings or there are multiple beneficiaries of the property, it is best to have a written agreement about who will take ownership of the home and, if you ultimately sell the home, you will want a signed written contract about how the proceeds will be distributed.  This will set expectations and prevent family feuds.  It may be best to have an experienced attorney draw up these contracts to be sure they legally bind the parties to the agreement and to ensure all necessary terms are in the contract. 

However, if the house is not worth what the balance of the mortgage loan is, and you are considering refinancing, you will want to contact the current lender who has filed the foreclosure case.  Sometimes, these lenders allow heirs of the borrowers who pass away to pay a portion of the appraised value of the home to pay off the mortgage.  So in these limited circumstances, this may be a good option.  In today's market, these circumstances are even more limited because most properties have a considerable amount of equity and therefore, lenders are not likely to offer the heirs alternative options.

Whether you choose to refinance or sell, on closing the mortgage lender will be paid in full and the foreclosure case will be dismissed. 

If you have a loved one who has passed away and their property is being foreclosed, contact Kyle & Kyle Law.  We offer free consultations with an attorney.  We can help you understand your options, help you decide what to do next, and handle the case in court.  Handling these decisions while grieving the loss of your loved one is not easy.  We have helped hundreds of families in these circumstances and we are here to help you make sound decisions and provide you with strategic legal advice, whether your ultimate goal is to keep the family home or sell the home for the cash proceeds.  Contact our office at 877-KYLE-LAW (877-595-3529) or schedule a free consultation with an attorney here

About the Author

Katherine R. Kyle

Katherine grew up in the beautiful mountains of Western North Carolina in the small town of Sylva.  At the age of nine her parents were divorced, and it was then that she aspired to pursue a career as an attorney.  After high school, Katherine attended Western Carolina University in Cullowhee, ...

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