Not a Lexis Advance subscriber? Try it out for free.
LexisNexis® CLE On-Demand features premium content from partners like American Law Institute Continuing Legal Education and Pozner & Dodd. Choose from a broad listing of topics suited for law firms, corporate legal departments, and government entities. Individual courses and subscriptions available.
Generally speaking, if you transfer a piece of real property subject to a mortgage to another person, that transfer violates the "due on sale" clause in your mortgage, essentially making the mortgage immediately due in full. In the course of buying or selling property, you would pay off the mortgage upon the sale of the property. However, what happens when the property is transferred due to the death of the owner?
Federal law provides some exceptions to the "due on sale" clause when the property subject to a mortgage (other than a reverse mortgage) is being transferred as a result of the person's death. While a full list of the exceptions to the "due on sale" rule can be found in The Garn St. Germain Depository Institutions Act of 1982, (U.S.C.) 1701j-3(d)(8), for estate planning purposes, property owners should be aware that the "due on sale" clause will not apply to:
So, if you own property jointly as (1) joint tenants with rights of survivorship, or (2) tenants by the entirety (for married persons only), with any person (relative, friend, business partner, life partner) and that person dies, you get full ownership of the property by operation of law (i.e.: the property does not pass through the person's Will, but instead passes directly to you as the joint owner), AND the mortgage continues, with no alteration to its terms.
If you give the mortgaged property to a person through your Will, a Trust, or intestacy if you don't have a Will, AND the person is your relative, then the mortgage can continue upon the transfer of the property to the new owners.
Some planning notes:
Two questions that I couldn't find quick answers to and I would appreciate feedback on:
Deirdre R. Wheatley-Liss is a shareholder of the Law Firm of Fein, Such, Kahn & Shepard, P.C., with offices in Parsippany and Toms River, New Jersey. She concentrates her practice in the areas of Elder Law, Estate Planning and Administration, Business Planning and Tax Law. Deirdre's individual clients range from their 20's to their 80's and beyond, while her business clients range from start-ups with exciting new ideas to 100+ year old business ventures. Clients seek Deirdre's advice and assistance with a variety of planning issues relating to identifying and meeting their personal, family and business goals, whether in a planning or crises situation.
For more information about LexisNexis products and solutions connect with us through our corporate site.