I Inherited a House with a Mortgage. Can the Lender Make me Refinance?

Due on Sale Clause Inapplicable Based on Death

No. If you inherit a property, or a fractional interest in real estate, there is generally no need to contact the lender to negotiate or otherwise ask for approval to keep paying the loan each month.

The commonly believed issue is that the transfer to heirs of a decedent, beneficiaries of a trust, or surviving joint tenants upon the death of an owner or co-owner will trigger a due on sale clause found in most mortgages, known in California as trust deeds. The due on sale clause generally accelerates the mortgage when a property is sold, meaning that, as a practical matter, an owner cannot sell the property with the mortgage. Indeed, if they could, many would try to do so if their property had a low interest rate as was found before mid-2022, as compared to the interest rates that went up dramatically thereafter.

However, in 1982, the United States Congress enacted the Garn-St. Germain Depository Institutions Act, which contains a section entitled “Preemption of due-on-sale prohibition” providing as follows:

Exemption of specified transfers or dispositions
With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units,… a lender may not exercise its option pursuant to a due-on-sale clause upon–…
(3) a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;…
(5) a transfer to a relative resulting from the death of a borrower;
(6) a transfer where the spouse or children of the borrower become an owner of the property;

12 U.S.C. § 1701j–3(d)

This means that if you inherit property, the lender cannot demand the full repayment of the mortgage solely due to the transfer of ownership as a result of the previous owner’s or co-owner’s death.

Talkov Law Partition Attorneys Can Help

Co-ownership presents numerous complications, including how to handle the property after the death of a co-owner or former owner. If you’re looking to end your co-ownership dispute, Talkov Law can help. As California’s foremost experts in partition action, having Talkov Law’s partition attorneys by your side means legal strategies tailored to maximize your outcome. For a free consultation, call (844) 4-TALKOV (825568) or reach out online today.

About Scott Talkov

Scott Talkov is a partition lawyer in California. He founded Talkov Law Corp. after more than one decade of experience at a California real estate litigation firm, where he served as one of the firm's partners. He has been featured on ABC 7, CNN, KCBS, and KCAL-9, and in the Los Angeles Times, the Orange County Register, the San Diego Union-Tribune, the Press-Enterprise, and in Los Angeles Lawyer Magazine. Scott has been named a Super Lawyers Rising Star for 9 consecutive years. He can be reached about new matters at info@talkovlaw.com or (844) 4-TALKOV (825568). He can also be contacted directly at scott@talkovlaw.com.

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