The mortgage does not disappear
An existing mortgage on an inherited property remains in place and payments must continue to be made, usually from the estate initially, to avoid the loan going into default while the estate is being settled.
Options for the beneficiary
A beneficiary who inherits the home generally has a few choices: keep the home and take over or refinance the mortgage, sell the property and use proceeds to pay off the mortgage, or in some cases assume the existing mortgage if the lender allows it.
- Keep the home and refinance into your name
- Sell the property and pay off the mortgage from proceeds
- Assume the mortgage where the lender permits it
Qualifying to keep the home
If you want to keep an inherited property, you typically need to qualify for a mortgage in your own name based on your income and credit, since most lenders will not simply transfer the deceased's mortgage terms to a new borrower without requalification.
Dealing with multiple beneficiaries
When a home is left to multiple siblings or family members, decisions about keeping versus selling can get complicated, especially if only one wants to keep it. A private or bank mortgage buyout, similar to a divorce buyout, is a common solution in these situations.
Frequently asked questions
- Do I have to pay off an inherited mortgage immediately?
- No, but payments need to continue during the estate process, and a longer term decision about keeping or selling the home needs to be made.
- Can I take over my parent's mortgage after they pass away?
- In some cases a lender allows an assumption, but more commonly you would need to refinance into a new mortgage under your own name and income.
- What happens if the mortgage is larger than the home is worth?
- The estate is generally not required to cover a shortfall beyond the home's value in most cases, though speaking with an estate lawyer about the specifics is important.