A life event happened and you were given a home with a mortgage. It may be a life-changing event for you such as your first experience with homeownership, or it could be a liability to your finances. So, what can you do if you inherit a home with a mortgage?
Death of a Family Member Caused You to Inherit a Home?
Firstly, if this happened to you, then we are sorry for your loss. It can be extremely painful to go through their home and relive all of their memories or to experience their lifestyle. Go at your own pace and do what is right for you, always.
There are some things you should know about the home, though. More specifically, the legal agreements that caused it to come into your possession.
After the death of a loved one, their assets will go through a process called probate. Probate is a legal process used to properly distribute an individual’s assets as outlined in their will and carried out by the executor of the estate. Unfortunately, this does not negate any of their outstanding debts or payments, such as a home mortgage. Those financial obligations will fall on their family.
Who Pays the Debt When Inheriting a House with a Mortgage?
The heir or the beneficiary is responsible for paying off the home. Mortgages are secured debts, meaning that payments have to be made to avoid foreclosure, even if the previous owner died and passed the property (and therefore the mortgage) to another person.
As an heir, you are not personally responsible for the mortgage payments unless you want to keep the home. If you do not want to pay for the home, it will be foreclosed (and will not affect your credit). That leaves heirs with the decision to:
- Keep the property
- Sell it and keep the equity
- Allow it to pass into foreclosure
What to Do After You Inherit a House with a Mortgage
Before you decide what to do, you should look at the home’s equity, the mortgage balance, and what the upkeep will cost if you decide to keep it or sell it.
Determine the Equity in the Home and the Mortgage Balance
Figure out how much of the home has been paid off, what kind of equity it has, what is left on the mortgage, and how much the market value of the home is. There are likely three options ahead of you.
- The home is almost paid off
- The home is about halfway paid off
- The home hasn’t gathered much equity due to a newer mortgage or outstanding debts
Then, compare the mortgage and any outstanding debt that came with the value of the home. You can always speak to a real estate agent about the potential list price of the property, or have it formally appraised.
Investigate Upkeep and Maintenance Costs
Next, you must consider the long-term implications of keeping the home. If you want to rent it out or live in it, will it need renovations and repairs? How much will the utilities and maintenance cost? How much will landscaping cost every month? Are there any big-ticket items you need to consider, such as a pool, new roof, foundation issues, HVAC problems, or leaks?
Also consider the property taxes and if you can get any tax breaks from owning the home. This could either make or break your decision.
Don’t feel bad if you can’t afford to keep the home. Owning a home is a huge expense that many people can’t afford. Whomever you inherited it – whether a living or deceased relative – would understand if you can’t afford it and would want you to live within your means and be happy.
Following a Death in the Family, Are There Co-Heirs?
In some cases, the relative may leave their home to a couple of people in their family. They could leave it to their children, or you and your spouse, or give joint ownership to the tenants in place or other beneficiaries.
If you fall into this category, you will need to speak to your co-heirs about their intentions for the property, as well as your own. When selling an inherited house, with a mortgage or without, unless you have each co-owner’s signature, you will not be able to transfer the title to the buyer at closing.
The Best Way to Sell an Inherited Home
In most cases, speed is key to avoid having a second mortgage and to avoid defaulting on payments. We recommend selling your home for cash to a company like Property Spot. They will be able to give you a fair cash offer for the home in 24 hours or less, and do not require any repairs, cleanings, or renovations to happen prior to the sale. Finally, you get to pick the closing date as well, so you will never be rushed as you’re getting your loved one’s affairs and belongings in order.
Property Spot can help you:
- Avoid a second mortgage
- Dodge costly repairs and renovations
- Quickly take the home off your hands
How Much Money Can You Expect to Receive?
The good news is that home prices are at an all-time high, which likely means that your offer will cover the outstanding expenses and then some. We can’t guarantee this, especially if the home came with significant debt. However, Property Spot can guarantee that your offer is 100% fair to the current market and to the base condition of the home (little repairs and outdated rooms don’t matter!).
On top of that, Property Spot goes the extra mile. They can offer moving assistance, have a wide network of real estate agents, and can help you choose the right method to sell your home, even if it’s not through them. So if you need a little extra help, give us a call at 480-400-7792 or visit us online. We’ll be happy to assist you!