You Inherited a House with a Mortgage – Now What? - Quicken Loans Zing Blog

The death of a loved one is an incredibly difficult time. Not only are you emotionally drained, but after the funeral you have the added anxiety of sorting through legal documents, financial information, and the last will and testament of the deceased. You want to be sure you take care of any financial loose ends, and that can turn into an overwhelming task.

One obstacle some may have to deal with after the death of a loved one is a mortgage. You might already have a home loan payment, and you simply can’t afford to take on another. So what options do you have, and what do you do next? We’ve got a few tips and things to consider when managing an inherited mortgage.

Determine who takes over the home

If there was a co-signer on the mortgage, that person is now responsible for making the mortgage payments. In the event a home is left to an heir via a will, the heir(s) – whether there are one or more people – is now responsible for the mortgage. It’s important that you establish who’s responsible for the loan, because this person (or group of people) will work with the lender to get details and information about the mortgage.

Gather all the mortgage documents

Hopefully your loved one kept a file of their mortgage documents. At the very least, try to find a document saying who services the mortgage. You, or your family attorney, will need to call the servicer to notify them of the death. Chances are they’ll want a copy of the death certificate before you can move forward. After verifying the death and updating documents, the servicer will then be able to tell you how much is left on the mortgage and how much the monthly mortgage payment is. At this point, you’ll have the information you need to decide how to deal with the remainder of the mortgage.

Start making the loan payments

First and foremost, if you decide to keep the home, you’ll need to begin making the mortgage payments. Otherwise, it may go into foreclosure.

Pay the mortgage off

If you can pay the mortgage off completely, that’s another option (and probably the best) to deal with an inherited home loan. With the house completely paid off, you can then keep the property, and maybe lease it out, or you can simply sell the home. Either way, paying the mortgage in full frees the property from a lender and allows you to do what you please with the home.

The home has no heirs or co-signers attached to it

If there’s no co-signer and no one in line to inherit the home, the bank or lender still need to collect on their debt. They usually end up selling the house to try to recoup the debt. Sometimes the amount brought in from the sale of the home doesn’t cover the entire loan balance. If that’s the case, then lender may seize the assets of the deceased to cover the remainder of the loan or simply assume the rest of the debt. This may vary depending on where you live.

Contact a lawyer if you have any specific questions or just feel completely lost; they can help you sort out specific questions. Laws fluctuate from state to state, and we all know how difficult legalese can be to read. Don’t be afraid to ask for help if you need it, and – most importantly – don’t sign or agree to something you don’t understand.

One thing your loved one can do now to help simplify the complicated process of dealing with a mortgage after their death is to get mortgage life insurance. If they pass before their mortgage is paid off, the insurance company will cut a check to pay the remainder of the mortgage, and the home will be paid off.

The time after a loved one dies feels like a whirlwind. Trying to tie up financial loose ends adds extra stress to an already traumatic time. But knowing what steps to take in advance can help alleviate the anxiety you might feel. Just remember to ask for professional guidance if you have any questions, or your gut tells you something isn’t right. It’s better to spend the money and come to the right decision with confidence, rather than guessing and hoping for the best.

Did you inherit a mortgage after a loved one passed? Do you have any other tips to help readers? Share them below!

 

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This Post Has 23 Comments

  1. My wife just recently passed away. We are both on the deed but she was the only one on the mortgage. I have more than enough funds to pay the mortgage off in full (it is a FHA loan) which I believe are insured; but that’s beside the point since I think that insurance covers the lender only if I do not pay off the home. I want to keep the home and pay off the mortgage in full — there is no pre-payment penalty. I could (if I had to even continue to make the monthly mortgage payment without any hardship on me what-so-ever. The only reason the mortgage is not in both of our names to begin with is my credit went in the sewer when I had a very mild stroke, followed by a bout of cancer and could not work. However, I was able to return to work (I am self employed) but not in enough time to repay so outstanding credit card debt and my late wife made a six figure salary so she qualified for the FHA loan, not me, but I am on the deed. I’ve spoken to an real-estate attorney but he told me for now just keep making the mortgage payments as usual as we have a second home that we were renting out the past three years and we decided to sell that one and again only my wife’s name is on the mortgage but there was a quit-claim deed made between myself and my wife in 2003 that the mortgage holder on that loan is taking into consideration so I can sell that property. If they don’t then I’ll just walk away from that one. However, the current home is the one I want to either pay-off in full or continue to make the monthly mortgage payments…..but that mortgage is with PNC and I have read Horror Stories about that bank so under the advise of my attorney I’ve not informed them of her passing which has only been a month ago. He told me to just keep making the mortgage payments on-line as usual until we hear back on if the other lender is going to allow me to sell the rental home. I’m in Florida and thankfully my wife had a ton of life insurance (but not enough to pay off both homes) and my social security check will be more than enough to pay the FHA mortgage held by PNC on our homesteaded house with money left over for everything else. Am I getting right advice from this attorney or should I find another one? She died intestate and her credit card debts (which amounted to a total under $10,000.00 were all cancelled and voided by her various creditors since I was not party to those credit cards in any manner whatsoever. I could have even paid off her credit card debt if I had to. My attorney upon hearing all of this (and he’s been in practice for 45 years) said that due to her credit cards becoming null and void and the company’s writing off the debt, there is absolutely no reason to go through a probate over one rental property if they refuse to allow me to sell it and I agreed because I want to use a portion of her life insurance to pay off the home I now live in that was our dream house.

    1. Hi Ronald:

      I’m very sorry to hear that your wife has passed. Your situation sounds very complicated, but I’m going to see if our home loan experts are able to give you any advice.

      Thanks,
      Kevin Graham

  2. My parents died two weeks apart leaving me their condo with a mortgage on it. My husband and can make the mortgage payments but would not qualify for a second mortgage because our credit has taken a beating over the past two years while I was caring for my parents and not working. Can I just make the payments on the current mortgage or even better can I have the mortgage transferred into my name so we can get the tax benefits from paying the mortgage? I would love to keep the condo and parents left me with no other assets to help with the mortgage. The house is in Florida but we live in Massachusetts.

  3. Hi need help..

    My uncle is dying of cancer and only has months to live.
    His mortgage left is 45, 000
    He want us to fund raise to pay his debts yet he has three adult children who could easily service the 60 euro a week payments.. he says if it’s not paid on full his ex wife will get the house..
    We are very uncomfortable about raising money when they have done nothing themselves..
    Please help with opinion and if any further info required please don’t hesitate to ask..

    1. Hi Justin:

      I’m very sorry to hear about your uncle. Quicken Loans is an American lender and I’m not familiar enough with European law to know how the title transfer would work in the event of his death. I suggest consulting an attorney familiar with the laws in your country.

      Thanks,
      Kevin Graham

  4. my dad is in hospice care and put his current house in my name for a beneficiary deed. I can’t afford to take on another mortgage so will be selling my dad’s home. Will mortgage companies be willing to work with me during the selling process. For example, if it takes 4 months to sell the house, I can’t afford to make 4 months of payments on my house and my dad’s house. Are banks likely to give some sort of ‘reprieve’ time after a death if they know i will be selling it?

    1. Hi Amy:

      Unfortunately, due to the strict requirements investors have around investing in mortgages, the lender most likely cannot have you skip payments without it affecting anything. The best option is to find a way to continue making the payment, perhaps by leasing the property out. You do have the option of telling the lender you would like to do a short sale and they’ll work with you to offload the property. However, a short sale does have a detrimental effect on your credit and it could affect your ability to get a mortgage for some time in the future. I’m going to pass your comment along to one of our Home Loan Experts who may be able to give you more information than I can.

      Thanks,
      Kevin Graham

  5. i need help, I inherited moms house when she died 5 yrs. ago, Im the only heir, I’ve kept up the home equity payments, I never told lender my mom died, I was afraid they’d ask for full payoff, I’ve had escrow overpayment checks sent in my moms name so I never could cash them, also I had basement flood damage, the insurance company issued a check with my name and the mortgage company name on it, how do I get the lender to endorse it? The insurance check is for a furnace replacement and winter is here and we need a new furnace quick. The deed is in my name now, but the mortgage is still in my deceased moms name, I was uncertain what to do so I did nothing except continue the payments.

    1. Hi Sheila:

      Sorry to hear about your loss. The best thing to do at this point is just call the mortgage company and explain the situation. They will be able to go over your options. You need that insurance check, so you need to tell them. They’ll be able to work with you. Good luck!

      Thanks,
      Kevin

  6. My domestic partner passed away suddenly Nov 17, 2015, we live in the state of Washington. His rental property in Las Vegas has on file a “transfer on death deed”. Upon death the property is to transfer to me. The property has an FHA mortgage. The transfer of title seem easy but I’m unclear as to how the mortgage is to be handled. My credit is excellent and am capable of paying the monthly payments, but at this time my income is limited and my work history is spotty.

    1. Good morning, Elaine:

      I’m sorry to hear about your loss. My thoughts are with you. I’m going to send your question to one of our Home Loan Experts that can give you more information than I can.

      Thanks,
      Kevin Graham

  7. My grandma passed in September, she left me my home (which I had already been living in and paying the mortgage on for the past 5 years- it has been paid out of my bank account to the mortgage company EVERY MONTH on time or early), I do not have good credit to refinance., but I AM capable of continuing the loan. The will was probated and the tax office has the property listed in my name now, our attorney told me it was simply a matter of contacting the mortgage company and having the name changed on the loan. I have spoken to several attorneys and ALL of them have different answers. On several legal websites AND from a couple of different attorneys I have found out there is a federal law preventing the mortgage company to accelerate the loan, simply because I am a relative (granddaughter) The mortgage company told me to fill out this packet so they can add my name to it for communications, but if I wasn’t to become financially responsible I have to apply for credit. If I just put my name on for communications what does that mean? If there is an overpayment on escrow will the check sent be in my name? Can they still foreclose on the home if I am keeping payments current but am unable to qualify for credit???

    1. Hey, Kristi. First of all, I’m sorry to hear about your grandmother’s passing. That’s never easy. As for your question, in order to protect your info, I’m going to have a home loan expert reach out to you with an email. They’ll ask you some questions and point you in the right direction. Best of luck to you and your situation.

  8. Hi, I’m in very much the same situation as Chris. Been paying on it for 9 years. I have ok credit but not enough to qualify for a mortgage. I’m stuck paying 6.25% ? any chance the/a lender would work with me ? Worst part is making monthly payments on time for 9 years that don’t even improve my credit. Not sure how or if I can deduct anything.

    1. Good morning, Alex. I’m going to send your question to one of our home loan experts. They’ll shoot you an email and help you worth through your options. Thanks for asking!

  9. My father passed away in January and my mother’s health is deteriorating. There mortgage has been paid off for years now. My dad’s Will has been probated and we have the letters testamentary. My mother is the executor. Does the deed need to be put in my mothers name only, or can we leave it as is?

    1. Thanks for reaching out to us, Susan. I’m sorry to hear about your mom’s current health and the loss of your father. I have shared your inquiry with our client relations team, and they’ll be in touch with you to discuss this further. Have a nice day!

  10. I have a question , my mom past some 7 years ago , the condo was left to me , I live in it. All I did was continue to pay the mortgage monthly along with the association fees. I figure there is about 30K on the buy out and I don’t have that …..and I have run into finacial difficulties . My question is how to sell it and what I have to do to do that . I have no clue but I certainly do not want to loss here either. It is not in my name I just paid the bills thus far. Thank you

    1. Hi Chris! I’ve passed this one to our team of home loan experts who will take a look and reach out o you shortly.

  11. My husband passed away and our house is upside down here in Las Vegas, Nevada. I have lost $6,000 in income and want to know what my options are? I cannot afford my current mortgage but have continued to pay it.

    1. Hi Vickie! Thanks for reaching out! I’ve passed your comment on to our team of mortgage experts and they’ll reach out soon to discuss your options.

  12. In my case, I have about the same amount of principal payment left on my loan that equals the amount fully guaranteed by the VA. So, I don’t believe the mortgage holder would go after any of my relatives, who certainly would not want to pay it off, when it could just collect from the VA – right?

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