I'm not sure if anyone will know, but thought I would ask just in case

I know someone who has already refinanced their mortgage once, and plans on doing so again in the near future in order to lower her monthly payments and to pay off credit card debt, etc. She is 68 years old, and thinks that her new mortgage term will be for about 40 years (not a typo).

My question is how will this affect her children when she dies? I don't think she has any kind of insurance whatsoever, so they will be left with the remainder of the mortgage payments, correct? If they can't afford to make the payments and the house were to go into foreclosure, would they face any penalties and/or have their credit scores be damaged?

Thanks in advance for any info you can give.

Cheers!

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Tracy Boutin | Copywriter
tracy@realestatewebmasters.com
250.753.9893

Sounds like Mom is trying to carry her own weight.

If she dies the property and debt will be handled by her estate. The executor of the estate will do as dictated by the will, but the debts will be paid by the estate before distributions are made. The executor may sell the home to pay off those debts.

Perhaps one of the children will want to purchase the home from the estate and the mortgage will still be paid off and the remainder distributed as dictated by the will. The child purchasing the home will have no debt unless he incurs it himself by financing the purchase of the home from the estate.

The only harm to the children may be that there is nothing left to inherit because she outlives her resources. Sounds like a good idea to me! Just don't run out too soon! The children should count themselves fortunate if Mom lives a long and quality life and they never need to subsidize her because of her choices.

Disclaimer: This is not legal advice and should not be relied on whatsoever. It is simply how I understand the process to work.

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Cal
Orange Beach Real Estate | Alabama Real Estate
The Greatest Real Estate Agent In The World Contest

Thank you so much for the info! It was very helpful.

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Tracy Boutin | Copywriter
tracy@realestatewebmasters.com
250.753.9893

First off I love your hair. Secondly, the interest on the mortgage is probably lower than the interest of her other debts. Spreading the term out to 40 years probably made her monthly debt much more affordable (most likely cut monthly payments in half).

Consolidating the debt doesn't put the children in any different position from where they started. The mother still owed the same amount of money just not all to one place. Now that all debt is held by the mortgage company it will be easier for them to settle her estate when she passes. I think she did the best thing as she is probably nearing retirement age and will be dependant upon a fixed income. She probably saved herself a bundle. If she were smart she would put the monthly savings back into the mortgage and shorten the term.

Thanks, it takes all morning to get the height, but it sure is worth it

Thank you for your input. The information provided here will be greatly appreciated by the parties involved.

__________________
Tracy Boutin | Copywriter
tracy@realestatewebmasters.com
250.753.9893