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

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

Edited by Michael Jensen, Mortgage and Finance Guru

Updated October 20, 2020

If you inherit a home with a mortgage you are responsible for paying the loan even if you are not listed as a borrower on the loan. You are also responsible for paying the mortgage if you already owned the home, even if the other person you owned the property with, 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.  Your other options are to pay off the mortgage, refinance the loan or surrender the property to the lender that holds the current mortgage.

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, homeowners insurance and any other applicable costs for the property you inherited, you can keep and live in the property or rent it out.

As long as you make the monthly payment on time, you should not have an issue with the current lender. If you have questions about the mortgage or want to change the loan terms, however, the lender may not be willing to work or even communicate with you because you are not listed as a borrower on the note.  For example, some people want the mortgage to be in their name so it appears on their credit report.

In this case you may need to modify the mortgage or refinance the loan in your name.  This process is handled on a lender-by-lender basis but is not really an issue if you keep paying the mortgage and have no need to interact with the lender.

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.  This is why if you cannot afford the mortgage payment, most people usually decide to sell the property and pay the 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 expenses. 

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. If you make enough money to afford the monthly housing expense for the home you inherited plus the expense for the property you want to buy, then you do not need to sell the inherited property to get approved for a new mortgage to buy another 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 your other monthly debt expenses including credit cards, car, personal and student loans.

Use ourMORTGAGE QUALIFICATION CALCULATORto determine the loan you can afford based on your monthly income and debt expenses

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

In closing, 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 continue paying the mortgage.  If you decide that refinancing is your best option because you want the loan in your name or because you can qualify for better terms, we recommend that you compare proposals from multiple lenders in the table below.  Shopping lenders enables you to save money and find the mortgage that is right for you.

Sources

“I recently inherited a house.”  CFPB.  Consumer Financial Protection Bureau, August 5 2016.  Web.