Note from the Editor: This article’s content is solely based on the author’s opinions and suggestions. It might not have received approval from any of our network partners through reviews, commissions, or other means.
Whether you sell it for a windfall, keep it as a home or a rental property, or keep it as a windfall, inheriting a house can significantly improve your long-term financial situation.
However, there are important decisions to be made first, such as whether to keep the house and why, how to handle any outstanding debt on the property, and how to cooperate with any additional heirs.
How Does LendingTree Get Paid?
Companies on this website pay LendingTree, and this pay may have an impact on where and how offers appear on this website (such as the order). Not all lenders, savings products, or loan options are offered by LendingTree in the market.
Note from the Editor: This article’s content is solely based on the author’s opinions and suggestions. It might not have received approval from any of our network partners through reviews, commissions, or other means.
Whether you sell it for a windfall, keep it as a home or a rental property, or keep it as a windfall, inheriting a house can significantly improve your long-term financial situation.
However, there are important decisions to be made first, such as whether to keep the house and why, how to handle any outstanding debt on the property, and how to cooperate with any additional heirs.
The legal process of inheriting a house
First, a disclaimer: State laws differ, and your situation might be different. The most typical legal procedure for inheriting a house is described below.
Most states don’t immediately put your name on the title when you inherit a house. The probate court judge is involved in the initial steps of settling an inheritance. The court examines the decedent’s will and authorizes an executor to carry out the terms of the will to the fullest extent permitted by law.
An executor’s responsibilities will likely include the following:
The property is still regarded as a possession of the deceased at this time. If that person had any unpaid debts, those debts could be paid for out of their assets. You have a “right to ownership” as an inheritor, but you don’t actually own the house until the title is in your name.
Steps to take when inheriting a house
The executor is a key figure for the process. To obtain the information you require, ask them for it and work together. Discover who your co-inheritors are. Perhaps the house will be passed down to you as one of many children or grandchildren.
Talk with any co-inheritors
Consult with the other heirs to the property if you aren’t the only one. Find out whether they intend to sell or keep the property. If some of you want to keep or live in the house while others want to sell it and divide the proceeds, the situation could become complicated. If the situation warrants it, you might want to investigate inheritance dispute resolution.
Without the consent of the other heirs, you won’t be able to sell the property, and someone will need to care for the house until a decision is made. However, upkeep is expensive, and even if you take on the role of caregiver, your legal claim to the home won’t be stronger.
Finding out who has a stake in the house and communicating frequently about everyone’s intentions and expectations are the best course of action
Get an appraisal
If the executor didn’t order one, consider getting an appraisal. Knowing the property’s cash value can have a big impact on whether you decide to keep it or sell it.
You might decide that investing in a low-value property that requires significant maintenance is not worthwhile. On the other hand, a well-maintained home might make a lovely getaway or rental property.
How much you owe in taxes will also depend on the value of the home. Inheritance tax laws vary throughout the U. S. but there is a chance that you will be charged estate, capital gains, property, and other taxes.
Evaluate any debts owed
Make sure liens that use the property as collateral are thoroughly investigated
Find out the amount owed and the payments if the property still has debts or a tax lien against it.
Compare the property’s total debts to its financial value and any sentimental value you and your family may place on it.
Consider getting professional advice
Professionals can help resolve issues and confirm any debt related to the property, the taxes you will be responsible for as the heir, and how purchasing or selling the home will affect your financial situation. Consider estate planners, accountants, financial advisors, trust officers, lawyers (preferably with real estate and estate planning experience), accountants, and/or philanthropic consultants.
To assess the tax implications, determine your legal options for ownership and buying out other heirs, or learn how to make the most of your new asset, you might need to rely more heavily on an accountant, an attorney, or a financial advisor.
Make sure the professionals you choose to hire can communicate with one another if you decide to hire more than one. This can make your life easier.
What to do with an inherited house
As a real estate heir, your choices are to live there, rent it out, or sell it.
The house you inherited might make a wonderful primary residence or vacation home. The caveat: This is typically the most expensive option. Mortgage, taxes, maintenance, repairs, insurance, and, if necessary, the purchase of any co-inheritors are a few potential expenses.
Renting out the inherited property may enable you to maintain and grow an investment as the home’s value increases and keep the house in the family. It may also bring in some nice passive income. You could lease it to a long-term tenant or to tourists in the Airbnb fashion.
If you have co-inheritors, you can either buy them out and continue renting the property as the sole owner, or you can continue renting it with your co-owners while splitting the expenses and the income. In either case, think about getting landlord insurance and working with a qualified property manager.
You could either sell the entire house or just a portion of it to a co-inheritor. The simplest way to divide the value of the inherited property, get some cash, and/or settle any outstanding debts owed by the deceased person is sometimes to sell it. Here are tips for selling your home. You might want to make repairs and renovations to the home to bring it up to date before moving in, renting it out, or selling it.
How to finance an inherited house
There are several ways you could finance an inherited house. Remember that the costs of buying out other heirs and paying off other outstanding debts may be factored into the amount you borrow.
When someone assumes an existing mortgage, this is known as a mortgage assumption. There would be no changes to the loan’s term, interest rate, monthly payment amount, or any other terms. The only distinction is who is or are responsible for the loan’s finances.
This choice is ideal when the terms of the existing mortgage are better than those of a new loan. However, not all mortgages can be assumed, and when they can, the lender has to give the person or people taking over the mortgage permission.
Purchase or refinance mortgage
With these choices, you might be able to take ownership of the mortgage and, ideally, negotiate a lower interest rate. If there is a reverse mortgage on the property, a refinance might be possible. Make sure to look up current mortgage rates and compare lenders.
A cash-out refinance transfers the mortgage into your name, may result in a lower interest rate, and enables you to tap into the equity in your house. It can give you money to cover expenses like paying off co-heirs or paying for remodeling or repair costs.
An investment property loan might be the best option for you if you intend to rent out the home. They permit you to obtain a mortgage for a property you won’t occupy, but they frequently have stricter lending requirements, such as higher down payments and interest rates.
Today’s Mortgage Rates APR as low as
It’s important to understand a home inspection vs. appraisal when buying a home. Both processes provide information and can affect your home purchase.
When you pass away, does your debt disappear or does it pass to someone else? Occasionally, a family member, like a spouse or parent, may share responsibility.
Learn about 2022’s current mortgage refinancing rates and when to refinance. Find out how to refinance your home and more information here.
FAQ
Can I assume my deceased parents mortgage?
Mortgage: Under federal law, lenders must allow heirs to a property to assume a mortgage. But an heir is not required to continue paying the mortgage. They have three options: settle the debt, refinance, or sell the house.
How do I take over a deceased parent’s mortgage?
Normally, you can handle the loan directly with the servicer. Remember that in order to assume the mortgage, you do not need to go through the underwriting procedure or requalify, but you will most likely need to provide a certified copy of the borrower’s death certificate (and possibly the borrower’s will).
Who pays mortgage on inherited house?
Decide Who Takes Over The House If a co-signer was used for the mortgage, they are now in charge of making the mortgage payments. If a house is bequeathed to an heir via a will, that heir (or heirs, if there are more than one) is now accountable for the mortgage.
Do heirs inherit mortgage debt?
The executor, also known as the “personal representative” in some states, manages the estate and, following settlement of all claims, distributes the remaining funds and assets to the heirs. You also inherit the mortgage debt if you inherited a house and had previously agreed to the promissory note and mortgage on it.