The Big Move: Can I refinance my late mother’s house? I’ve spent $20,000 on repairs — and I’m running out of money

The property is worth about $ 215,000 or more — I was told there is $ 67,000 left on the mortgage. I’m not looking to sell, as it’s a rental right now with a tenant. I plan to live in the house in seven years after I retire from my job in New York City.

The house needs some work done to it, and I don’t have the funds for the repairs. I need about $ 20,000 to repair and update the house. I am doing so now with my funds, but I’m running out of money. It’s a lot — can you please advise me?

Sincerely,

Fixing up Mom’s Home

‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.

Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Jacob Passy at TheBigMove@marketwatch.com.

Dear Fixing,

I’m sorry for your loss. Resolving the outstanding financial matters left over when our loved ones pass away isn’t an enjoyable process, and I can imagine being based in New York has only made things more stressful.

Before you can begin considering how to get financing in order to repair your mother’s home, there are certain things you will need to do.

To start, as you figure out the financial situation with this home, make sure you continue to pay the mortgage off each month. Debts still need to be paid, even if the mortgage holder died. The last thing you would want is for the home to go into foreclosure while you sort everything out.

It’s great that you were already able to work out things with your brother, and I assume that, as you have already gone through the probate process, there are no other potential heirs who might have a claim on the property. As The Moneyist could tell you, squabbling over inheritances is never a fun affair.

But you do not say whether or not the home’s title is now in your name, and that should move to the top of your priority list. If you wish to keep this home, you will need to take over the mortgage that was in your mother’s name. During this process, you should run a title search to ensure there were no other debts or back taxes owed on the property.

Once the title is in your name, gather up all the documents you have for the existing mortgage, and contact the lender or mortgage servicer to begin the process of transferring the mortgage to you. If you don’t know who the lender is, that information should be recorded already on the home’s title.

After a home is inherited, “the Garn-St. Germain Depository Institutions Act of 1982 includes exceptions that allow relatives and spouses to take over the house’s mortgage payments without requiring them to be paid in full,” real-estate investment company Beachworks LLC notes in a blog post.

For the exception to apply, the home must have been bequeathed to you in your mother’s will — otherwise, the lender may seek to enforce the “due on sale” clause, through which it can request the payment of the full mortgage amount because the home is changing ownership. Even in that case, you should be able to negotiate with the lender to refinance the loan into your name or get a new loan to pay off the original one.

Beachworks warns that subsequently renting out the home can make things more complicated where the mortgage is concerned. “Because you won’t be living in the home personally, the lender may require you to refinance the mortgage under your own name,” Beachworks wrote.

In other words, not only can you refinance your late mother’s existing mortgage, you may be required to do so in order to keep the house. Keep in mind that a refinance comes with closing costs and other fees. During the process your lender might offer to waive the appraisal, but I would avoid doing so. You want to have as accurate a financial picture of the home’s value as possible.

Hire a home inspector to examine the property. While you might have a sense of the repairs that need to be done, you don’t know if there are hidden — and potentially costly — defects that need to be addressed. The last thing you want is to go to the effort of refinancing the home only to discover that you need to undertake an even more costly repair, such as replacing the foundation.

Finally, I think you should begin shifting your mindset and approach to this home. In your letter, you referred to it as your mother’s house — not as your own. But if you intend to own it — and fix and lease it — then it’s not her home anymore. It’s yours.

You may not have a large chunk of cash laying around to do repairs now, and that’s understandable. But owning a home is not a small commitment, and the mortgage is not the only bill you need to worry about. Insurance, taxes and ongoing maintenance all need to be considered.

So long as you’re leasing it out, handling the vagaries of your tenants will be another potential headache. What happens if the current renter leaves? Would you be able to line up another one easily, or would you need to hire a real-estate agent and pay their fee?

That all may sound like quibbling, but it’s important to approach property ownership clear-eyed. Ask yourself this: Am I hanging onto the home out of sentimentality? Perhaps this is your childhood home, or at least a place where you made some treasured memories with your mother. Holding onto it and, perhaps one day, living in it may seem like the easiest and best thing to do, but it could become a never-ending burden. Make sure keeping this home is an active and informed choice, so that you don’t regret it down the road.

I wish you and your whole family the best of luck, and hope that whatever happens to the home you continue to treasure the memories you all have of your mother.