Once you’re in contact with the mortgage servicer, you’ll need to decide what you want to do with the house. If there are multiple heirs or you aren’t the executor of the will, this can get complicated, especially if everyone involved can’t agree on what to do with the home.
We’ll talk about what to do when the situation is fairly straightforward, such as an adult child inheriting a deceased parent’s house or a surviving spouse taking over a loan they weren’t originally on. If your situation is more complex or you anticipate conflict among the heirs, speaking with a lawyer may be a good idea.
Can I Sell The Inherited House?
One option is to sell the home to pay off the mortgage and distribute any leftover funds from the sale to the heirs as dictated by the will or the laws of the state.
If you want to keep the home, work with the servicer to get the mortgage transferred to you.
If you can’t afford the monthly mortgage payments under its existing loan terms, ask the servicer about loss mitigation options, such as loan modification, which may help you stay in the home and avoid foreclosure.
If there was a reverse mortgage on the property, the loan amount is due after the borrower’s death. If an heir wants to keep the property, they must repay the loan. Otherwise, they can sell the home or turn the deed over to the reverse mortgage servicer to satisfy the debt, resulting in a reverse mortgage foreclosure.
Can I Refinance An Inherited Home?
Selling a home is an easy solution if there are multiple heirs and no one wants to hang on to the property. But what happens if you want to keep the home and your co-inheritors don’t?
One option is to buy out the other heirs. But of course, not everyone has money to buy out one or several heirs.
A refinance can help you free up funds to buy out the other heirs and assume ownership of the property. But be mindful that buying out the other heirs will make you solely responsible for all mortgage payments.
FAQs
A deceased person's mortgage becomes the responsibility of the person inheriting the home. The heir has several options such as moving into the home and assuming the mortgage, buying out other heirs if they also inherited a portion of the property, or selling the house and using the proceeds to pay off the mortgage.
What happens to a mortgage when the person dies? ›
A mortgage lives on after the death of the borrower, but unless there is a co-signer or, in community property states, a surviving spouse, none of the deceased person's heirs are responsible for paying the mortgage. Those who are in line to receive an inheritance may be able to take over payments and keep the house.
How to handle a mortgage when a spouse dies? ›
Mortgage: Federal law requires lenders to allow family members to assume a mortgage if they inherit a property. However, there is no requirement that an inheritor must keep the mortgage. They can pay off the debt, refinance or sell the property.
How does the mortgage company get notified about a death? ›
When a loved one dies, you should notify the mortgage company quickly. Typically, the mortgage company will require a copy of the death certificate. If no one notifies the mortgage company or pays the mortgage, the loan servicer could begin foreclosing on the home.
What happens when you inherit a house that's not paid off? ›
Inheritance Through Probate
If the deceased (or decedent) has debts, their remaining assets, including their home, may be sold to pay them off. Once all debts have been settled, the remaining assets are distributed among heirs and beneficiaries.
Can you inherit a house that still has a mortgage? ›
If you inherit a home with a mortgage, you have the right to “stay and pay.” However, rightful heirs often encounter difficulty when dealing with the mortgage servicer to obtain information about the mortgage loan or learning about their options as an heir.
What debts are forgiven at death? ›
Unsecured debts are the most common types of debt forgiven at death. Examples of unsecured debt include federal student loans and medical bills.
What happens if I died and my wife is not on the mortgage? ›
But, if the surviving spouse is not listed on the mortgage, there must be a transfer of ownership in order for the surviving spouse to keep the house. Once ownership is transferred to a surviving spouse or any other heir, it is up to them to continue making payments until they decide what to do with the house.
Can I take over someone's mortgage? ›
When buying a house, you'd usually choose a lender and apply for a brand-new mortgage. But in cases where the house you're eyeing has an assumable mortgage, you can take over — or “assume” — the existing loan, potentially benefiting from terms that are more favorable than ones you'd receive in the current market.
Can I take over my parents' mortgage after death? ›
So, if you've inherited the home of a loved one, you can assume their mortgage and continue making monthly payments, picking up right where they left off. Heirs should also be able to continue making payments to keep the mortgage current even if they haven't legallyassumed the property's title.
Mortgage protection insurance (also called mortgage life insurance and mortgage protection life insurance) is a policy that pays off the balance of your mortgage when you die. The life insurance death benefit from an MPI policy typically decreases as you pay off your mortgage, while your premiums stay the same.
Can you inherit mortgage debt? ›
If you leave your home that has an outstanding loan to a beneficiary in your will or trust, your beneficiary will inherit not only the property but also the outstanding debt. They may have the right to take over the mortgage and keep the home, or they may choose to sell it and keep the proceeds.
Can a mortgage stay in a deceased person's name? ›
No, a mortgage can't remain under a deceased person's name. When the borrower passes away, the loan won't disappear. Instead, it needs to be paid. After the borrower passes, the responsibility for the mortgage payments immediately falls on the borrower's estate or heirs.
How do I assume a mortgage from a deceased family member? ›
However, you'll likely need to provide a certified copy of the borrower's death certificate (and potentially the borrower's will). If you are a joint owner, you will likely have to show the deed with your name on it. Once you've assumed the loan, you can continue making payments on it or opt to refinance.
What happens when someone dies and leaves you a house with a mortgage? ›
As long as you're a qualified successor in interest — someone who inherited or otherwise acquired ownership as a result of the homeowner's death — you can take over the loan once the deed is signed over to you. The law also entitles you to modify the loan if you're not financially capable of making the payments.
Can a family member take over a mortgage? ›
While most mortgages aren't transferable, some lenders might make an exception for transfers between parents and children. You'll need to speak with your lender to see if you're eligible and understand the requirements.
Do mortgages have a death benefit? ›
A mortgage life insurance policy is a term life policy designed specifically to repay mortgage debts and associated costs in the event of the death of the borrower. These policies differ from traditional life insurance policies. With a traditional policy, the death benefit is paid out when the borrower dies.
Can a deceased person be removed from a mortgage? ›
To get the deceased borrower's name removed from the mortgage: Send the borrower's death certificate to your mortgage lender. Follow up every 48-hours to make sure they received the death certificate. Ask them to open up a request to have the deceased borrower's name removed from the loan.
What happens to the loan if the borrower dies? ›
How do lenders recover a personal loan after the death of a borrower? Apart from the security created in favor of lenders, the legal heir(s) of the deceased borrower is/are liable to repay the loan taken by the deceased borrower to the extent of Estate of the deceased borrower received by them.
