How to divide estate with existing mortgage and one heir wants to keep house...

[rushd0ugh]

Hello. My mother recently died. My parents' estate calls for a 50-50 split of assets between myself and my sister. Easy enough. But here's the twist: She wants to stay in the family home and buy out my interest, but she does not have the cash to do this.

The house is worth $530,000 and the remaining mortgage is $130,000. That means there's $400,000 in equity. If we sold the house it would be easy... $200,000 to each of us after the mortgage is paid off. But she wants to keep it.

She'd like to take out a new mortgage, and take out cash which would pay me my half of the equity at closing. The question is: What happens with the remaining $130,000 mortgage? Do we each have to pay $65,000 to settle it before she can take out the new loan? Do I pay $65,000 and she rolls her $65,000 into her new loan? What benefit do I get for my $65,000 cost?

I'd really appreciate some insight into this if you know the answers. Do I need to hire an estate attorney or estate accountant? I don't want to force a sale as she wants to stay in the family home. Many thanks in advance.

[ostell]

This is a UK site so you might not get specific advice.

However... Your sister needs to take out a mortgage to cover the $130k AND your $200k. If she can't do that then you will have to sell.

perhaps the current lender will extend?

[rushd0ugh]

But aren't we equally liable for the $130,000 mortgage debt? So if I pay $65,000, she would also be responsible for $65,000. She could take on the $120,000 debt and then withhold $65,000 of my equity. I'm not sure why this makes so much sense to me, yet I might be completely wrong...

[des8]

The mortgage is repaid from the gross figure raised by the sale of the house
This leaves the net value of the estate, of which your share is 50%.

The executor has to realise the assets and normally would do it by selling the house and paying off the mortgage.
This would give a net figure of $400,000, of which your share is $200,000.

If your sister wishes to retain the house, your share is still $200,000
By paying half of the mortgage you are reducing your share by that amount.

At least that is how we view it this side of the pond