After You’re Gone, Does Your Mortgage Live On?

Image of two people reviewing a mortgage and discussing end of life plans.

You might be wondering about that house or condo you’ve left in your will. Often, after a homeowner passes on, the real property is sold from the estate to pay off debts. But maybe you have a relative who would like to have and keep your home.

For the sake of exploring the question, say you still owe a $50,000 mortgage balance when you pass on. Of course, you could leave your beneficiary enough money to pay your loan off, if you are financially able to do so. Or you could pay it off early yourself.

But if you need to pass the home on with a mortgage, can your beneficiary just keep your house or condo, and pick up the monthly mortgage payments where you left off? At least the next owner would have a head start — inheriting your home equity, and just paying what’s left on the balance.

Let’s look at how this plan could play out.

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Buying or Refinancing? Mortgage Servicing Matters.

Be sure you’re dealing with a company that takes service seriously.

Image of a frustrated person hunched over a desk with their head in their hands. Captioned: Buying or Refinancing? Mortgage Servicing Matters.

Various companies are involved in one mortgage. The home buyer’s journey might begin with a local mortgage expert. Then, the mortgage expert helps the buyer find a lender. Once the loan is approved, a borrower gets a mortgage servicer, too. Some lenders service their own loans, but many don’t.

You might be familiar with your mortgage servicer as the company that posts payments to your account, which you review online from time to time. Your mortgage servicer is the company that keeps money in escrow to pay your local property taxes and your homeowner’s insurance premiums. To pay more each month against your principal, you visit the mortgage servicer’s website. Mortgage servicers can help a borrower through forbearance, or work with a borrower to remove private mortgage insurance from an account. Mortgage servicers also report their borrowers’ payment activity to credit bureaus.

In short, mortgage servicers are a big part of a homeowner’s life for years. Customer service is crucial.

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Interest Rates on the Rise? Assumable Mortgages Never Looked Better.

Image of a person seeming happily surprised while looking at a computer. Captioned: Assumable Mortgages Never Looked Better

Congrats to the 2020 and early 2021 buyers who locked in fabulously low rates!

As the economy gradually pulls itself out from under the pandemic, people are talking about interest rates rising in 2021 and beyond. While rates will fluctuate, the overall trajectory is on an upward climb. Yet some new mortgage holders will keep those great mortgages on their homes even when they refinance or sell, thanks to assumable loans.  

An assumable loan is a perk of federally backed mortgages. It allows the loan terms to stay on the house, even if the title changes names. The loan is ported from the original borrower to the next title holder without the creation of a new loan. The new homeowner picks up the monthly mortgage payments where the original borrower stops.

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How a Sudden Disaster Impacts Your Mortgage Loan

Image of a tornado near a town. Captioned: How a Sudden Disaster Impacts Your Mortgage Loan

As co-insured parties, you and your mortgage lender both have a stake in the value and condition of your home.

Your stake in your property value is obvious. But the lender also has a vested interest. Your home’s value is the collateral for the loan. So, catastrophic damage raises serious questions about the status of a mortgage (or a deed of trust). If an unexpected calamity damages a home, here’s what buyers and owners should know about the interplay between the insurer and the mortgage company.

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Mortgage Approvals: The New Landscape for Post-Pandemic Home Buyers

It’s now obvious: the mortgage lending industry is forever changed. Here’s what happened — and what’s likely to come next.

The Year of Minimum-Risk Lending

Image of a person signing documents. Captioned: Mortgage Approvals: The New Landscape for Post-Pandemic Home Buyers

Back in April 2020, we noted that mortgage lenders were getting tougher on loan applicants. Perversely, the borrowers who stood to benefit most from the low interest rates that led to a refinancing boom were the ones who faced the highest barriers to access. Lenders scrutinized any changes in applicants’ work lives, income and credit profiles, looking for signs of instability.

Banks are traditionally uncomfortable with non-salaried applicants and volatile income streams. Without a continual stream of W2 wage income, applicants are often considered too risky. Some mortgage companies simply stopped working with applicants outside the Qualified Mortgage (QM) category in 2020. Even the companies that had, pre-pandemic, used their professional discretion to help viable borrowers. Even the ones that specialized in out-of-the-box loans.

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The Partial Release of Mortgage: When You’re Only Selling Part of Your Property

A person frolicking in an open green space with some trees in the background. Captioned: The Partial Release of Mortgage

What if a potential buyer is interested in acquiring a part of your property, and you’re willing to sell?

If you’re a land owner with full rights in a piece of property, you may legally sell any part of it — unless bound by an agreement to the contrary. If a parcel is mortgaged, an owner may not subdivide parts to sell, thereby shrinking the loan collateral, without the lender’s approval. A homeowner who attempts to sell mortgaged property without the lender’s permission invites the risk of triggering the loan’s “due on sale” clause and having to pay off the full mortgage.

Thus, to transfer title to a part of a property, the owner must first receive a partial release of mortgage. This instrument allows the sale of a section of a property, free and clear, yet keeps the mortgage on the remainder.

How does the partial release process play out? In this article, we boil it down to a few key elements. We also offer some contextual questions to consider. By examining the context of a potential sale, a potential seller can avoid serious losses in value.

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Applying for a Mortgage? Get the Facts on Credit Scores—and How to Improve Yours

Image of money scattered on a table top. Captioned: Get the Facts on Credit Scores

A credit score is part of each home buyer’s whole debt and income picture. Lenders consider it a key factor when deciding to approve a loan application. To put the score in context, a lender’s top questions are:

  • Whether the borrower can repay the loan, and
  • Whether past credit history suggests that the borrower will repay the loan.

The FICO® Score, which is the best known of several credit scoring tools, comes from the Fair Isaac Corp. As we’ll see, mortgage lenders can take other scores into account, too, and even tweak the factors in the scores to come up with unique tests for loan approvals. The good news? While mortgage lenders use their secret sauces to determine creditworthiness, we, the applicants, give them the ingredients.

Here, we take a look at how credit scoring actually works, and how to optimize your score.

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