Eventual fallout for existing loans on inherited property

Post date: 2022-09-28 04:44:59
Views: 15
My father passed away a bit over a year ago, as a result of which, my brother and I each essentially inherited a house. Both houses had small existing loans active on them that are still active. What's the best course of action for dealing with those loans, especially for tax purposes?

So, my dad owned two residential properties - his place of residence and a rental. My brother and I are each currently occupying a house and have gone through the process where the houses are now in our names as far as the assessor and county are concerned. Both houses have active loans on them where the remaining principal is around 1/8 the total property value, with interest rates in the 3.5% range; I'm not sure of the remaining term on either loan, but I'm guessing 15ish years. Neither of the loans have been transferred to have myself or my brother as the person on the loan, so we can't claim a tax benefit for interest payments, but the interest payments end up being small enough that both of us would need a large amount of other deductions that we don't have to bother itemizing deductions anyway. Both of us have the ability to pay off the remaining loan any time we want, but would prefer not to since the monthly payments are small and we'd rather keep the money that would be used to pay off the loans invested elsewhere. I've looked into refinancing the loan on my house with my current bank, and it was a pretty ridiculous situation - if I made a down payment of $20K, I'd only succeed in pushing my loan back out to a full 30-year term and increase my monthly payment by about $15. Neither my brother or I have been able to talk to anyone at the current lending institution about whether assuming the loans as-is is possible, but if it were, I think that would be our preferred path. If that's not possible, what happens if we just leave the current loans as they are and the lenders keep filing 1099s for my father's estate? Does the IRS care about that? Would the bank? Is there any way we'd potentially get in trouble for doing that?
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