What Do You Do Next When You Inherit a House with a Mortgage?
In most circumstances you inherit a house unexpectedly. One of the first things to do after inheriting a house is to understand if there are still mortgage payments on the house.
This question faces the fact that the house inheritance has the possibility of being either a huge financial gain or loss. For your sake, we hope it’s a huge gain!
So, your house still has a mortgage?
Now what do you do next when you inherit a house with a mortgage?
What Do You Do Next When You Inherit a House with a Mortgage?
Just because you inherited a house with a mortgage does not necessarily mean this inheritance is a huge loss.
But, what do you do next when you inherit a house with a mortgage?
You have several options. We have gathered the main four things to consider when deciding:
- Transfer Ownership
- Taxes and Liens
- Sell the Property
- Disclaim the Inheritance
Four Things to Consider
Transfer Ownership:
First, if you decide to take the inheritance you must transfer ownership of the property into your name. This will allow you to continue with the house as you wish, legally.
Your ownership is established when the property title is taken by the beneficiary, you, and recording the deed.
Important Note:
When you inherit a house with a mortgage, you inherit the mortgage as well. Therefore, it is your duty to contact the lender and make arrangements to take over the mortgage payment.
However, check if the house’s mortgage includes a due-on-sale clause.
What is a due-on-sale clause?
The due-on-sale clause states that the loan will become due and payable should the borrower transfer the property to someone else. If this is the case, you may be required by the lender to pay off the mortgage and/or sell the property.
But, there’s an exception!
The Garn-St Germain Depository Institutions Act of 1982 makes provision for this exception in the event of the property being transferred through inheritance.
Therefore, a close relative to the deceased borrower is allowed to assume the mortgage payments and thereby retain ownership.
Taxes and Liens
The next step in what do you do next when you inherit a house with a mortgage is to understand and deal with the property taxes and liens.
First, check to see if your relative’s estate executor has dealt with the back property taxes and liens before passing the ownership onto you.
Unfortunately the back property taxes and liens do not die with the owner, they are attached to the property and are transferred to the beneficiary.
We recommend finding an attorney or a financial planner for advice and assistance on this issue once you inherit a house with a mortgage.
Sell the Property
It may be the most obvious thing to do when you’re trying to figure out what to do next when you inherit a house with a mortgage, sell the property.
Once the ownership has been transferred and you have consulted an attorney or a financial advisor that it is not in your best interest to keep the property, you may opt to sell it.
If this is the case, you should get the house on the market as soon as possible to avoid paying any additional mortgage payments as this may negatively affect your finances.
Reminder:
You have no legal obligation to make the mortgage payments just because you inherited the house.
But, if you cannot make the mortgage payments it is advised to contact the lender and have them take the house or you can let the house go into foreclosure.
Important Note:
If you allow the property to go into foreclosure, this may affect your credit score.
Disclaim the Inheritance
The above options help you understand what do you do next when you inherit a house with a mortgage but you still have one more option.
There is no obligation for you to accept the inheritance. That is, you can disclaim the inheritance and refuse it which means you do not take on the property or the mortgage.
If this is your choice, you must state this in writing and deliver it to the estate’s executor within the specified time frame. You are then seen as having predeceased the deceased and the property will go to whoever was next.
It’s not easy to understand what do you do next when you inherit a house with a mortgage. It’s possible that the inheritance can be a huge financial gain or loss for you.
The above options are just a few things that are possible. Do research or seek out guidance from professionals on what the best option for your specific situation is.
We hope this guide has helped you start the thinking process and understanding of what your options are when you inherit a house with a mortgage.
If you’ve transferred ownership and now are thinking “I want to sell my house fast ,” you’re in luck!
We buy houses in Los Angeles and we buy houses in orange county. So anywhere in Southern California, we are who you should call to receive a cash offer on your home.
