Did you recently inherit a house with a mortgage? When a loved one passes away and leaves you their home, they didn’t intend for it to be a hardship, but if the home hasn’t been paid off, it can quickly become one. Then you are faced with the hardest decision to make when inheriting property, whether to sell or try to keep it.
What You Should Know about Inheriting a House with a Mortgage
When the owner of a home with a mortgage dies, the debt remains. That means the mortgage must be paid, or the person inheriting the property must assume the loan and make the payments. The exception would be if the deceased had enough cash assets in his or her estate to pay off the loan and specified in a will that the home would be inherited mortgage-free.
You would not be searching to find information about inheriting a home with a mortgage if the exception applied, so that leaves paying the unpaid balance owned in a lump sum or by assuming the payments. Understandably, it can be an overwhelming choice to make.
Grief is hard enough, but it becomes even harder when deciding whether to take on the mortgage payments, especially if you cannot afford to. Understanding your options can help you make the right decision.
What are My Options?
If you’ve inherited a house with an unpaid mortgage, you have three options to consider: rent, sell or keep the house. Read more about each option below.
Rent the Property
When someone passes away, there are many things that need to be completed to ensure their estate is closed and assets are properly distributed. This responsibility often falls on the individual chosen to be the executor of the last will and testament.
By renting the property, you are able to receive income, which can help ensure the monthly mortgage is paid on time. This gives you time to create a plan to either pay off the mortgage or sell the property. A great idea is to list the property for rent for the same amount that is due on the mortgage – no more, no less. Don’t try to make a financial profit here, just make sure that you have enough revenue coming in to pay for the mortgage and monthly expenses until you can come up with a long-term solution.
Sell the Property
The most obvious choice is to simply sell the property right away. This will allow you to pay off the mortgage, pay off all taxes owed, and keep any leftover profits. The only drawback to this is that if you try to sell it on the traditional market, it can take some time to list the property, get a bid accepted, and complete the closing procedures to finally sell the house. If this takes any longer than a few months, and you are listed as the owner of the property, this could negatively impact your credit and create a huge financial liability, unless you are making the mortgage payments until the house is sold.
If the home is worth more than the mortgage, you may be able to sell it fast for cash. However, if the balance of the inherited house’s mortgage is more than the total value, negotiating with the lender for a short sale of the property may be the best solution.
Keep The Inherited House
Selling is the easiest route, but staying can be the sweetest. One might make more money by selling, that’s true. Renting is also a great choice. But for many, the home they inherit is the home they grew up in. It hurts to give it up.
There’s something to be said for waking up each day in the house where you took your first steps. Where the bus picked you up for the first day of school. Where you spilled grape juice all over the white carpet and made your brother swear not to tell mom. Whatever it is, it’s important because it’s important to you. And more Americans than ever are deciding that money isn’t everything, and they want to live in a home that tells their story and want their children to live in the home of their grandparents. There’s something to be said for that.
If You Inherited a House With A Mortgage & Need Help, Reach Out
Don’t Go It Alone
No matter what you decide, asking for help can’t hurt. Ask someone you trust for advice. Additionally, consider hiring legal counsel. Big State Home Buyers is here for you, too, if you need help deciding what to do with your inherited house with a mortgage.
We help you determine your best option, whether that means working with us or not. Contact us to talk about it.