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Handling mortgages during probate

Probate can be a confusing process when a Michigan resident dies and the estate’s assets include a piece of Michigan real estate that is subject to a mortgage. Other types of debts need to be dealt with as well, both before the estate enters probate and while the process is occurring.

Dealing with mortgages during probate

Executors or representatives of estates are responsible for paying administrative costs and resolving final charges after probate is opened. To pay ongoing estate expenses and final bills, the deceased’s assets may need to be liquidated, depending on which debts apply and to what scope.

The personal representative should refund the beneficiaries if they continued paying the deceased’s bills before probate was opened. There will be one exception to this rule – if the deceased bequeathed real estate to a specific beneficiary and they want to assume the mortgage or refinance the property.

Probate and mortgages

The Garn-St. Germain Depository Institutions Act of 1982 says a real estate beneficiary can take up the mortgage upon or after probate. Under this law, lenders cannot call loans or foreclose upon death. A current mortgage is usually required to qualify.

What if the deceased person took out a reverse mortgage?

The deceased’s inheritors can either repay the reverse mortgage or pay the lender 95% of the appraised value, whichever is less. There is a 30-day deadline. Refinancing or selling the property are also options, but the reverse mortgage must be repaid when the homeowner or borrower dies and no longer lives there.

Which debts are not subject to probate?

If enough funds or property are liquidated, the estate must pay all the deceased’s debts. Failure to do so will result in debts not being paid. Unless they signed loans or owe debts, beneficiaries are not required to pay them.