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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 169 Comments

  1. My parents have a will leaving everything to me, including their home. The home is basically the only asset they have. They have a conventional loan that states on the paperwork “non-assumable” which doesn’t sound good to me but I know NOTHING about a mortgage. There’s about $100,000 left on the mortgage.
    I see a lot of the answers posted state to just keep making the mortgage payments, as the mortgage company just wants their money, which is no problem but what happens once the loan is actually paid off and the title is in my parents name?
    Will they take the home? Can I never sell? I have no idea what to do but want to be prepared beforehand so I know what I’m up against. I doubt I would qualify for my own loan because even though my credit is about 750 I only make about 30,000 annually. Any guidance is greatly appreciated.

    1. Hi Stacey:

      I’m going to take the simplest part first. Since you are named in the will is the sole beneficiary, if they pass, you get the house. The title becomes yours. As far as the mortgage, the non-assumption clause should apply in the case of inheritance. The non-assumption clause is there so that no one takes over the original mortgage in the event that the property is sold. You don’t have to assume the mortgage formally in order to keep making the payments. However, if you were ever to refinance, you would have to qualify for the mortgage based on factors like credit and income. You can sell the property at any time. I hope this helps!

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