close-up of a wondow on a house

Dealing with the death of a loved one is hard enough, but it often becomes more complex when you have to figure out what’s going on with their assets and debts.

If they’ve left behind a house, that’s one of the bigger responsibilities that you, as the person’s next of kin, will have to figure out how to deal with. Not only do you have to worry about the mortgage, but there’s the issue of estate taxes. Let’s take a look at these one at a time.

Mortgage

If the property has a mortgage on it when you inherit it, you may have a few options in terms of dealing with it, but there are a few things you need to clear up before you can decide what your game plan is.

Who’s Responsible for the Property?

Before we worry about anything to do with inheritance, we need to determine if the mortgage had a cosigner. If the loan had a cosigner, that person is responsible for continuing the loan payments following the owner’s passing.

If there’s no cosigner, one of two things can happen:

  • If the person’s spouse isn’t living there and there are no other family members that are heir to the property, the lender can take possession of the property and attempt to pay off the remaining loan balance by selling the house. If the sale doesn’t cover the existing balance, the lender may be able to seize other assets to cover the remainder of the debt, or they may simply have to assume the rest of the debt. The lender’s options vary depending on where you live.
  • If the person has a surviving spouse that still occupies the property, they can continue to make the mortgage payments regardless of whether they were initially on the loan. The same can be said if the house is inherited by a family member, whether it’s through the will or probate.

What Are Your Options?

If you inherit a mortgage and want to keep the house, the first thing to do is contact the servicer of the loan. They’ll need to see a death certificate and verify that you’re the heir of the house before they can give you more information on the loan balance.

Once that’s done, you’ll be able to consider your options. If you have the money, maybe the best option is to just pay off the house. You can do whatever you want with it, including sell or rent it out, unencumbered by a mortgage.

This option may be particularly attractive if you can pay it off with your life insurance and not touch the rest of the funds in the estate. And then there’s mortgage life insurance which pays out in the event that the mortgage is not paid off at the time of death.

If you don’t want to pay the whole mortgage off, you have the option of continuing to make the payments. In certain instances, you may even be able to refinance the mortgage.

Estate Taxes

Houses are included in estate taxes. If the house is being passed to heirs, they will have to pay taxes on the fair market value of the property out of the funds and assets in the estate. Consult a tax adviser to go over your options for determining fair market value.

If you sell the property later on for more than the fair market value at the time you inherited it, you’ll have to pay capital gains tax on the difference between the sale price and the fair market value. For example, if the house was worth $100,000 at the time of the person’s death and the heirs later sold it for $105,000, they would pay capital gains tax on $5,000.

Grieving the death of a loved one is hard enough without having to worry about any financial responsibilities left behind. Talk to your family members about finances so that everyone can be better prepared if something happens.

Still have questions? Leave them in the comments below, and we’ll do our best to answer them. When dealing with houses and estates, we recommend consulting a lawyer or tax adviser for the best advice.

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This Post Has 30 Comments

  1. I have inherited my Mother’s home and there is an HELOC on the home that I plan to continue to pay. I also plan to move into the home, but was wondering if a lender will loan funds for remodel with an existing HELOC already on the home. Thanks

    1. Hi LGD:

      We don’t typically work with HELOCs, but what we can do is help you do a cash-out refinance to accomplish your goals and incorporate the payoff of the HELOC into it if you qualify. If that’s something you’re interested in, you can go over your options online with Rocket Mortgage or give one of our Home Loan Experts a call at (888) 980-6716. Hope this helps!

      Thanks,
      Kevin

  2. My father passed away in 2013 and he left me his home, which still has a mortgage on it. I have been living in the home, making the mortgage payments, but have yet to probate the will. The past 2 months I fell behind on the mortgage (company I was with for 7 years decided to shut down with no notice to employees!), and wish to begin a repayment process with the mortgage company, Seterus. Will I need to begin probate to put the house in my name in order to do this, or can I get a repayment plan put in place without probating just yet? I am now able to catch the mortgage back up as I am working again, so I am hoping to hold off on the probate if I can ($$$-it’s kind of expensive!). Any advice or direction would be very appreciated. Thank you.

    1. Hi Jessica:

      I’m glad to hear you’re getting back on your feet. My gut says you’re going to have to go through probate, but you may want to talk to Seterus first to determine what their policies are. That would be where I would start and I would go from there.

      Thanks,
      Kevin Graham

  3. We (brother and I) inherited my mother’s house via a document that was created years ago that kept the ownership in her name until her death and then was transferred into our names upon her death years ago. He kept the house for years empty paying the HOA dues, utilities, nursing home bills (before Medicaid started), repairs and taxes until he finally sold it this year for $165,000. He gave me $60K and a 1099-S for that amount. I printed out a Zestimate from Zillow for $175K the week my mother died as prices in her area were declining. My half basis at her death was 87.5k and was paid the 60k after my brother took his half plus expenses. How is this reported to the IRS? To make things simple my half basis is 87.5k and I sold it for 82.5k a loss. What forms do I use? I know I can’t claim a loss and my brother must deal with his share on his taxes. Thank you.

    1. Hi Paul:

      I have no idea. We try to answer basic tax questions when it comes to things like escrow. However, taxes are not an area we specialize in. I would recommend speaking with a tax professional. If a consultation isn’t in the budget, there may be tax preparation software that can help. I’m sorry I can’t be of more assistance.

      Thanks,
      Kevin Graham

  4. Hi, my mother in law passed and left her son and I the house with a mortgage. Can we just continue paying the payment or is there other steps. Also if inherited a house and before the deceased passing was in the middle of sailing the house and signed all paper work except closing, can the person who inherited the house sign the closing part… Thank you

    1. Hi Joann:

      I’m very sorry to hear about your mother-in-law. I would notify the lender or servicer handling the loan, but you can absolutely just continue making the payments. Once they’re notified, they’ll let you know what if anything has to be done to complete the sale.

      Thanks,
      Kevin Graham

  5. I’ve lived with my mother, taking care of her for more than 15 yrs. She died at age 93. The trust says all assets be split 50-50 with my brother. Who does the house belong to and what taxes are to be paid? Thank you

    1. Hi Gary:

      If it’s 50-50, the house belongs to both of you unless you decide to hash out who gets it. You would pay property taxes and capital gains taxes if the property is ever sold. I hope this helps!

      Thanks,
      Kevin Graham

  6. I am in the will only one got the house. It is paid off. I would like to know if i sell the house and get the money do i have to put that in her estate. Or is that money mine now. Thank you

  7. My mother recently passed and I inherited her home. The mortgage is paid and there is a small home equity loan or $5000 that will need to be paid.

    Question:
    How do I first go about transferring the deed over to my name and take possession?
    Then do I contact the insurance company telling them I own it?
    I assume I then contact the bank for the loan?
    And who do I speak with about property taxes?

    Thanks much

    1. Hi Bob:

      I’m very sorry to hear about your mom.

      I’m going to start this with the disclaimer that I’m not an attorney. That said, assuming you have records showing you inherited the property, you should be able to take those to the county registrar and they’ll be able to help you. The county registrar should also be able to help you with the property taxes once it’s in your name. Once it’s in your name, you can contact the bank and the insurance company. They’ll go over next steps at that time. Hope this helps!

      Thanks,
      Kevin Graham

  8. My mom is dying of colon cancer and wants to give us her house. My husband and I live with my mother as I’m the one taking care of her. She owes on the house plus there is a second on the house which she hasn’t paid on in a few years. How can we continue living here? What can we do to keep the house? Any advice would be very grateful.

    1. Hi Dee:

      I’m very sorry to hear about your mother. The fact that she hasn’t paid on the second mortgage in a few years could cause a problem if you want to buy the house or get it in your name otherwise because that all has to be cleared up. That being said, I think it would be best for you to speak with one of our home loan experts at (888) 980-6716. They would be able to give you advice on how to move forward.

      Thanks,
      Kevin Graham

  9. My mother has just passed, and I have been named as executor. She has left me her home… which is paid off… but it is in a much needed state of repair. I am, just like so many others, at a complete loss as to where I start, let alone where I go from here.

    1. Sorry for your loss. The first thing to decide is whether you want to keep the house. If you do, you can take a look at a cash out in order to finance necessary repairs. If you want to do that, you can always check out Rocket Mortgage or call 888-728-4702.

      If you don’t want the house, you can make it presentable and sell it. Those are really your options. Good luck!

      Thanks,
      Kevin

  10. Per my father’s will I inherited his home, solely me. The will is about to move through probate although he passed away in June. I am paying his mortgage on top of my own rent so his home isn’t seized. My question, do I have to wait to move in? I would love for his house to bit be vulnerable sitting vacant. I’m ready to go home but wondering if that’s allowed or must I wait forever for probate? My intention is to live there, not sell the home.

    1. Hi Jennifer:

      Since only you inherited the home, it shouldn’t be an issue. In fact, it’s better from an estate perspective if you move in because that way the property is being maintained as it goes through the process.

      Thanks,
      Kevin Graham

  11. My husband inherited his grandparents property, there is no mortgage, how can he go about getting a loan on it with the deed to help fix it up. His credit is not very good, he was turned down by our bank already.

    1. Hi Bel:

      He can do a cash out, but it sounds like he may have better luck if he fixes up his credit first. The good news is credit is something that can be fixed. Here’s a blog post with some tips on building that score back up. He can also talk to one of our licensed mortgage bankers who can look further into his situation by filling out this form or calling 888-728-4702. Hope this helps!

      Thanks,
      Kevin Graham

  12. Yes I lived with my mother and she passed in 2002008. The house has been paid off. I just had a 5000.00 deck added to the upstairs balcony. I was buying out my brothers half ..now there was a will. Next I know all of this isgoing thru probate I had been removed as executrix and I now had to sheriffs at the front door telling me I needed to get out or I will be removed. Can anybody tell me what just happened..since then I have been living in unoccupied bank forclosyre homes cuz my family and I have no place to live. Is there anything I can do to have this probate case reviwed again. Desperately need help.

    1. Hi Janette:

      I’m sorry to hear about your situation. I’m going to forward this to our team to see if they have any other ideas, but my advice to you would be to talk to an estate planning attorney. They would know the most about the probate process in your state and whether it can be reviewed.

      Thanks,
      Kevin Graham

  13. I moved in with my Mom to help. She is 97. She has a reverse mortgage and has me as her executer in her will. Also I am to get the house. My brother lives with us…and has down syndrome and needs a home. What will I have to do…can we stay or will I have to sell? Judy

    1. Hi Judy:

      You have the option to stay by either paying off the loan or refinancing into a regular mortgage. I’m going to have someone from our One Reverse Mortgage team reach out and go over this with you.

      Thanks,
      Kevin Graham

  14. I’m requesting financing for home that is in final stage in probate process. The home has no loans on it. Judge asked that I get approved in the event my siblings need to be bought out. I have had house appraised.what else do I need to do? Claudia

    1. Hi Claudia:

      The mortgage lender will have to make sure you can qualify to make the monthly payment based on your income, assets and credit. I’m going to have a Home Loan Expert reach out and give you more information.

      Thanks,
      Kevin Graham

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