Many times, selling inherited real property is in everyone’s best interests, but there are always exceptions. Here are two of the more common ones that we see:
- Dad lived alone in failing health, so Diane agreed to move into the house with him. As Dad’s health declined even further, Diane left her job to become a full-time caregiver. Although there is nothing in writing, everyone understood that Diane could stay in the house after Dad passed away as a reward for her service.
- Some time after her husband died, Mom remarried. Before she could change the ownership paperwork to name her new husband as a co-owner, she suddenly passed away. It sometimes happens that Mom never even started this process, for one reason or another. Now, although the heirs could probably evict their stepfather and sell the house, no one really wants to do that. Besides, under these facts, the stepfather might have an ownership claim.
If your situation involves these circumstances, or something similar, you might retain the house for quite some time. In that case, and if the house has a mortgage, refinancing might be a good option.
The 1 Percent Rule
When the mortgage rate on your loan exceeds 1 percent of the current market rate, it may be a good time to refinance.
Everyone has an opinion as to when interest rates will go up or down, but no one really knows for sure. Keep an eye on the Federal Reserve’s activity. The Fed governors usually meet twice a year, and if they raise the prime rate, it’s a near certainty that consumer lending rates will increase even more than that.
Rising Home Values?
Once interest rates start rising, more buyers usually enter the market, and that drives up home values because of supply and demand. If there is enough equity in the home, a new lender will not require mortgage insurance, significantly reducing the monthly payment. If there is a lot of equity, a cash-out refinance may be available as well.
Comparables usually determine fair market value, so it may be worthwhile to befriend a neighbor and find out the sales price of the house down the street.
Your Own Status
If the decedent did not have a life insurance policy and your family had to pay lots of expenses out-of-pocket, it may be a poor time to refinance from purely a cash flow standpoint. But if an insurance company covered most or all of these costs, refinancing might be worth a look.
Contact us now and let us be your resource for decisions related to inherited real estate.
