5 Options When You Inherit A Home With A Mortgage

Performance Property Real Estate Question

Q: I am inheriting my parents’ home. I believe they took out a home equity loan. Do I have to pay that off? Donald, Union, NJ

A: When you inherit a home, you and your siblings and other heirs also inherit all the associated debt on the property including the mortgage if a property has one or more mortgage loans. When you inherit a house with a mortgage, there are basically 5 options available to you:

  1. Continue making payments on the mortgage: Inheritors can choose to keep the mortgage under existing terms and continue to make payments until the mortgage is paid off.
  2. Refinance the mortgage: If inheritors cannot afford to keep up the mortgage payments, they can seek an affordable refinancing option. This option is especially valuable if the interest rate on the mortgage is higher than the current rates. Right now prevailing mortgage interest rates are higher than they have been in the recent past, so this probably is not the best option for you right now if keeping mortgage payments low is the primary objective.
  3. Pay off mortgage(s)
  4. Sell the home: To avoid liability or payments, inheritors can choose to sell the home.
  5. Do nothing which will inevitably lead to the home being foreclosed on.

Unless the will explicitly states otherwise, inheriting a house with siblings or other heirs means that ownership of the property is distributed equally. The siblings can decide whether the house will be sold and the profits divided, whether one will buy out the others’ shares, or whether ownership will continue to be shared. If you and your siblings inherit a house after a loved one’s passing and their legal will does not leave any directives for how the home should be used or divided, it’s up to the heirs collectively to decide what to do with the home. Thanks for your question, Donald.

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