Until just a month ago, I had never heard the term “Successor in Interest”. That was until I called the financial institution that was holding my father’s mortgage loan. My father passed away bout 3 months ago, and with that, a lot comes at you all at once.
One major “to do” lingering on my checklist was determining what to do with my father’s mortgage loan.
We had already decided to keep the home and rent it, however we still needed to determine whether we could assume the loan, or would need to pay it off.
During my call with the lender, I learned by default, I would become a successor in interest.
So what is a successor in interest? Well, that was my question too. According to Lsd.law:
“A person who takes over ownership or control of something from someone else. When this happens, the new owner has the same rights as the old owner and nothing changes.”
You can find a more detailed definition here.
Well that’s quite interesting, but my next question, and the crux of this blog article…

Is it better to remain a successor in interest of a property or attempt to assume the mortgage loan's debt?
Well, it depends on several factors, including your financial situation, goals, and the terms of the loan.
The following are some considerations that can help guide your decision. Please don’t rely solely on this information, and always, ALWAYS, consult with your real estate attorney, accountant, and/or financial advisor.
Considerations for remaining a Successor in Interest
Plans for the property – IF you plan on selling the property relatively quickly, remaining a successor in interest and avoiding the time and likely expenses of assuming a loan may be to your advantage.
Depending on the lender's policies, the loan assumption process might involve approvals, paperwork, and potential fees. Remaining a successor in interest can avoid the complexities associated with this process.
The legal and tax implications of assuming a mortgage can vary. By remaining a successor, you might avoid certain legal and financial complexities.
As a successor in interest, you are not liable for the mortgage loan, therefore if you are no longer able to make the mortgage payment, the lender cannot pursue you.
Your credit is not affected as it would be if you were to assume a loan.
If you are the legal owner of the property, and successor in interest, you should still be able to take the mortgage interest rate deduction when tax season rolls around. Note: Tax rules change all the time, so please consult and confirm this for your specific situation with your tax advisor, accountant, and/or tax attorney.
Consideration for assuming the Mortgage Loan Debt
Based on the notion that you plan to keep the home to live in or rent out, one advantage of assuming the mortgage loan debt over remaining a successor in interest would be to build up or strengthen your credit history and rating by paying the mortgage payments in full and on time in your name.
Other important factors to consider
Financial Situation: Assess your financial stability and ability to manage mortgage payments.
Future Plans: Decide if you plan to live in the property long-term or if selling is on the horizon.
Credit Score: Evaluate how each option might impact your credit score.
Legal and Tax Implications: Consult experts to understand legal and tax ramifications of both options.
Personal Goals: Align your choice with your financial and personal objectives.
Ultimately, your decision should be based on a comprehensive evaluation of your individual circumstance (along with any other party who has an interest in the property), financial goals, and the specific terms of the mortgage loan.
In a situation such as this, it’s always important to consult with a financial advisor, legal expert, and real estate professional that can provide valuable guidance in helping you make the best decision for you and your family.
I hope this article helps, or at least points you in the right direction toward consulting with a financial and/or tax expert.
If you need a referral to a real estate attorney, accountant/CPA, or financial advisor, I work with several amazing ones, and would be happy to refer you.
If you would like real estate guidance as to whether it makes sense to keep the property or sell based on current and future/expected market conditions, please reach out as I'd love to help!
You can connect with me here.
Warmly,
- Joe
Comments