My 87-year-old mother (Wisconsin resident) wants to know what happens to her mortgage when she dies. She wants to leave the house and the low-interest mortgage to one of her children but wonders whether that's possible. Does it depend on whether the mortgage is "assumable" or not? Can she add that child to the existing mortgage now without initiating a new one? Thank you!
2 Answers from Attorneys
Given that this is a house in Wisconsin, it may depend on certain probate laws or real estate law specific to that state, so your should make sure to ask an attorney there as well. For the most part, mortgage are not assumable, but they will rarely seek to foreclose so long as the monthly payments are being made. That does not mean that they can't only that they usually don't. Trying to add a person to the mortgage may be a good idea, especially if the person added wants to deduct mortgage interest. Check with the mortgage company to see if they are willing to do this.
Your mother needs to consult a WI elder law or estate planning attorney.
What happens usually (barring anything contrary under WI law) is that when a person dies with real estate, the land passes to the heirs subject to the existing mortgage. Although the mortgage may not be assumable, inheritance is sufficiently common such that if the heirs keep paying the mortgage then the heirs get to keep the property. However, your mother can make a will providing a means of satisfying the mortgage - like getting special life insurance for it. Or the home may have to be sold to pay claims of any creditors.
There also may be other options now such as adding the children to the deed as joint tenants with right of survivorship and adding them to the mortgage if that is possible. That is something that would have to be discussed with your mother and the mortgage lender.
Really, your mother needs to do estate planning NOW. Just looking at the house is only giving an attorney one piece of information. No one one knows what your mother owns, what her other debts, if any, there are, what her circumstances are or what her estate planning goals are. And it would be unethical for any attorney to discuss these things with you. If your mother is mentally competent then she needs to see an estate planning attorney in her area.
Or you could try re-posting your question to a Wisconsin probate attorney.