In a country of property owners like Spain, inheritance and housing often go hand in hand. With luck, the house will be paid off at the time of death, but what happens when it is not? What happens when you inherit a mortgaged home?
A mortgage on an inheritance can be a problem for the heir . The reason? Debts are also inherited and that includes the mortgage, which you will have to start paying as an heir after the change of ownership of the mortgage.
In the worst case scenario, you could inherit a home that has been remortgaged or with a mortgage that is higher than the value of the house. But don't panic just yet! Now you'll find out what you can do to prevent that from happening and to be able to enjoy the inheritance.
Ask about life insurance
Nowadays, many mortgage loans come with life insurance linked to the mortgage. It doesn't matter if it was to reduce the interest rate because the bank asked you to or because it's just a good idea, the first thing you should do when you inherit a mortgaged property is to check if there was life insurance.
With life insurance linked to the mortgage, you will not pay inheritance taxes on that money, which will be used entirely to reduce the mortgage debt. In the best case scenario, it will be used to pay off the entire mortgage. As if by magic, the house will no longer have a mortgage.
You can consult it in the Single Life Insurance Registry with the literal death certificate.
What are your options if you inherit a house with a mortgage?
When you inherit a house with a mortgage or any other asset, you can accept that inheritance, not accept it, or accept it for the benefit of inventory.
Accepting the inheritance
You also accept this mortgage, which would have to be paid off after changing the ownership of the loan. When paying the inheritance tax, the mortgage will be subtracted from the value of the property, since it is considered a deductible expense.
Reject the inheritance
You simply waive any right to receive anything. Quick and easy!
Accept the inheritance for the benefit of the
You separate your assets from those of the inheritance, so that you do not have to pay the debts of the inheritance, including the mortgage, with your own money or assets. It is a way to ensure that you do not accept more debt than the total assets you will inherit.
To help you understand better, before dividing the inheritance, the value of the assets and debts will be calculated and you will be able to pay the mortgage with the assets you inherit.
What happens if there are two owners on the mortgage or the home?
When there is more than one holder on the mortgage, you will only inherit the proportional share that corresponds to you . As an example, if the mortgage is at 50%, you will inherit half of the mortgage debt.
If you reject the inheritance, the most common thing is that the debt will pass entirely to the other holder of the mortgage.
What procedures must you follow in an inheritance with a mortgage?
One of the procedures you must complete is to notify the bank of the death of the mortgage holder . If you do not do so, the bank will continue to charge the mortgage payments to the deceased's account.
It is not enough to tell the bank that the owner has died. Whether you decide to accept the inheritance or reject it, you will have to present the following documents:
Documentation for an inheritance with a mortgage
- The death certificate.
- The certificate of last wills.
- The will or declaration of heirs.
- The deed of inheritance award.
- The certificate of payment of inheritance tax or renunciation of inheritance, as the case may be.
What can you do with the mortgage?
Once you complete the paperwork, you will have the house and its mortgage. Is there anything else you can do? Of course! You can make sure that the mortgage is not more expensive than what you can find on the market now .
You just have to see how our mortgages are, digital, fresh and different and compare them with the mortgage you have inherited. It is very easy for you to improve the conditions and even eliminate the associated products you have.