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Are You Responsible for Mortgage If You Inherit a Home?

Are you responsible for the mortgage if you inherit a home?

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

If you inherit a home with a mortgage you are responsible for paying the mortgage even if you are not a co-borrower on the loan. You are also responsible for paying the mortgage if you already owned a home before a co-owner passed away, even if the co-owner who passed away was the sole borrower on the mortgage.  In short, you and any other parties that inherit a home with a mortgage are required to continue making the loan payments on the home you now own.

For example, if a husband and wife are both on a property title but only the wife is on the mortgage, if the wife passes away, the husband is responsible for continuing to pay the mortgage as long as he owns the home (despite him not being on the mortgage before he inherited the home).

The same rule applies if a husband and wife lived in a home together but only the wife was listed on both the mortgage and the property title.  If the husband inherits the property after the wife passes away, the husband is now required to make the mortgage payments even though he was previously neither a co-borrower on the mortgage or a co-owner of the home.  This example is relevant to many people who inherit real estate from relatives and applies even if you never lived in the property you inherit, regardless of your relationship with the relative or the person who bequeathed you the property.

If you can afford the monthly mortgage payment (as well as property tax and homeowners insurance) on the property you inherited you can keep and live in the property or rent it out.  If you cannot afford the mortgage, most people usually decide to sell the property to payoff the principal loan balance.  In this scenario you can keep the profits from selling the home after you pay off the mortgage, less any real estate commissions and closing costs.  Please note that if you inherit a home and do not pay the mortgage, the lender can eventually foreclose on the property and you may lose the home.

Inheriting a property can also impact your ability to buy another home but you are not necessarily required to sell the property and pay off the loan before you can buy a home. If you make enough money to afford the monthly housing expense (mortgage payment plus property tax and homeowners insurance) on the home you inherited plus the housing expense on the home you want to buy, then you do not need to sell the inherited home to get approved for a mortgage to buy a new home.

For example, if the monthly housing expense on the inherited home is $2,500 and the housing expense on the home you want to buy is $3,000, then you need to earn sufficient monthly gross income to afford $5,500 in combined housing expense in addition to other monthly debt expenses including credit cards, car and student loans.

If you want to buy a new home but cannot afford the payments on two homes plus your other debt then the lender may require you to sell the home you inherited and payoff that loan balance as a condition to approving you for a new mortgage to buy a new home.

We advise you to contact a real estate attorney if you have any questions regarding your legal obligations when you inherit a home, including the requirement to pay the mortgage, property tax and homeowners insurance.  

We also always recommend that you contact multiple lenders to understand how they would handle your unique situation. You can review lenders in your area on the table below. We advise you to contact at least five lenders as qualification guidelines vary. Plus, shopping lenders is the best way to save money on your mortgage and find the loan that is right for you.

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Current Mortgage Rates as of July 16, 2019
  • Lender
  • APR
  • Loan Type
  • Rate
  • Payment
  • Fees
  • Contact
View All Lenders

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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.

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%
Current Mortgage Rates as of July 16, 2019
  • Lender
  • APR
  • Loan Type
  • Rate
  • Payment
  • Fees
  • Contact
View All Lenders

%

Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.

About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry

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