Rise Up Logo

Call Us Today!
(562) 659-9599

Estate planning essential for homeowners

Estate planning essential for homeowners

What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.


From Freddie Mac’s weekly survey: The 30-year fixed rate improved by 2 basis points, landing 3.65 percent better than last week’s 3.67 percent. Ditto for the 15-year fixed, landing at 2.92 percent, down from last week’s 2.94 percent.

The Mortgage Bankers Association reports a 2.3 percent increase in loan application volume from the previous week.

BOTTOM LINE: Assuming a borrower gets the average 30-year conforming fixed rate on a $ 417,000 loan, last year’s rate of 4.33 percent and payment of $ 2,070 is $ 163 more than this week’s payment of $ 1,907.

WHAT I SEE: From rate sheets hitting my desk that are not part of Freddie Mac’s survey: Locally, well qualified borrowers can get a 10-year fully amortized fixed at 2.95 percent, a 15-year fixed at 3 percent, or a 30-year fixed at 3.625 percent, all with zero points.

WHAT I THINK: Recently, a lovely lady, a dear friend and a longtime client unexpectedly lost her spouse. He had an easy laugh, was a kind soul, a terrific person. She had 25 great years of marriage with him.

My friend was smartly prepared. Many years ago, at the time of her retirement she planned and arranged for them to at least have enough life insurance to cover the mortgage for that day when death departed them.

Whether you own your home with a spouse, significant other, family member, a friend or by yourself, arranging the financial cushion to replace the loss of income will be one less thing to have to come to terms with and manage when that loved one passes on.

What happens to the mortgage if a borrower on title dies? Suppose you inherit the home. Do you have to get a new loan? Does the lender call the loan through a due-on-sale clause?

Freddie Mac spokesman Brad German says the 1982 Garn-St. Germain Act outlines nine exemptions preventing a lender from calling a mortgue due on properties with four units or less.

Ok good. You can take over the existing loan if you meet one of these encompassing exemptions. In my 29 years as a mortgage broker, I have never seen a situation that did not fit one of those exemptions.

Once you do take over the existing loan you should figure out if it’s a good loan that is a “keeper” or if you can refinance under a better rate and terms.

Often times, when there are multiple heirs and one of them wants to keep the property solely, there will be a need for a cash-out refinance to distribute the equity of the property. So, it may necessitate a new loan, regardless.

Next, what about the property taxes? Does the property get re-assessed and the tax bill balloons?

According to estate planning attorney Colleen Barney of Albrecht and Barney, the following rules apply:

1) The property will not get re-assessed if it passes to the surviving spouse pursuant to a will or trust, whether the spouse is a joint tenant or has community property rights of survivorship.

2) Your property taxes on your primary residence, plus 1 million dollars of assessed value of other properties, will pass to your children without reassessment.

3) Property passing to anyone other than a spouse or child, through joint tenancy, a will or a trust, will trigger a property tax reassessment.

4) Tenants-in-common interest will get reassessed unless it passes to the spouse or a child (provided the portion passing to the child does not exceed the $ 1 million assessed value limitation).

Another consideration is how your heirs can avoid Internal Revenue Service probate taxes. That’s why you should consider hiring an estate planning attorney to review your situation, or if you already have an estate plan, then review and update your plan as things in your life change over time.

I’ve seen countless times when people fail to plan, the survivors end up having to sell the property because they can’t afford to keep it. Be smart like my friend and create a safety net for your loved ones.

Jeff Lazerson can be reached at jlazerson@mortgagegrader.com

The Orange County Register – News Headlines : Real Estate News