Dealing With Hubby's Mortgage After Death

Dear Debt Adviser,

My husband died and left a house with a mortgage payment. My name is not on the paperwork as a co-signer, but I do live in the house. This was on purpose. I was kept out of the mortgage so I wouldn't be held responsible if something happened to my husband. Now something's happened, and I'm not sure what I need to do to keep the house. I have not told the mortgage company of my husband's death, though I have been trying to keep paying the bill. What should I do? Do you have any advice for paying a mortgage after the death of a loved one?

-Linda

Dear Linda,

I'm sorry to hear that your husband passed away. I'm doubly sorry that you're now stuck in a financial bind. You're not alone, unfortunately. Women tend to outlive men, yet many fail to plan for this eventuality.

Here are some suggestions for people in your situation.

In the best of worlds, your husband would have had mortgage insurance or a life insurance policy that would allow you to pay off or pay down the home loan. From the tone of your question, I gather this is not the case. Because of the potential complexity of your remaining options, I want you to speak with an experienced real estate attorney to help you decide how to proceed. Here are some options to consider.

If your name is on the deed or if you are left the house in your husband's will, you may be eligible to assume the mortgage under the Garn- St. Germain Depository Institutions Act of 1982. This law limits a lender's ability to foreclose on an up-to-date mortgage when the owner of the property changes. It doesn't mean that the lender won't try or that the lender might not try to tack on a fee when it shouldn't. If you are a surviving joint tenant, or if the title was transferred by inheritance to a related owner-occupant, the Garn-St. Germain law bars the lender from enforcing the due-on-sale clause. Your attorney will help you sort out all these possibilities. This option would, of course, only work for you if you can afford to continue to make the mortgage loan payments.

You may want or need to refinance the mortgage to get a better rate, extend the term and lower the monthly payment. This would allow you to stay in the house if it was left to you. If your credit is damaged, or for some other reason you can't qualify for a mortgage on your own, you have a couple of other options. If you can afford the payments, consider asking a family member to co-sign with you.

A reverse mortgage might work for you. There is no credit or income criteria needed to qualify for a reverse mortgage. However, you must be at least 62 years of age. Also, you'd need to have a mortgage balance around half of the home's value or less. A reverse mortgage would allow you to stay in the home, and you would not have to worry about paying additional mortgage payments. A reverse mortgage may even allow you to take some equity out of the home while you are living there. You can learn more about reverse mortgages at the U.S. Department of Housing and Urban Development's website.

If none of these options work for you, you may need to face the possibility of selling the home. You could use any proceeds to find a suitable new property or rental. If your name is not on the deed and the home was not willed to you, then the proceeds of the sale would go to your husband's estate. What happens from there would be up to the laws of your state.

Good luck!

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