Inheritances can lead to a number of unique situations and difficult decisions, and things can be particularly complex when you inherit a property that has a mortgage attached to it. What do you need to understand if you inherit a property with a mortgage?

Your Next Steps When You Inherit a Mortgage

  1. Start by gathering up any relevant mortgage documents, including information about who is servicing the mortgage currently. You will need to call that institution to let them know of your loved one’s passing and probably supply them with a copy of the death certificate as proof. Next, they will update their system and let you know the balance remaining on the mortgage and the monthly mortgage payment that would fall to you.
  2. Even if you think that you might want to sell the home, you should resume making mortgage payments right away to prevent the house from entering foreclosure. If you do not want to pay the mortgage or do anything with the home, you could also tell the mortgage lender to proceed with foreclosure.
  3. Remember that you are not legally required to assume responsibility for anything that was left to you in a will. You can sell the home, decide to move into it or allow the bank to foreclose without it having a legal ramification on you.
  4. Check to see if there are property taxes outstanding, liens attached or estate taxes due on the property before you consider taking possession of it. Property taxes and mortgage liens will remain attached to the property even after the owner dies, so you would be responsible for making things right.
  5. Understand that mortgages have a due-on-sale clause that means the entire remaining loan balance could be called due whenever the property is sold or transferred in ownership. While every lender will not necessarily do so, you could be responsible for paying off the entire mortgage if you take possession in those circumstances.
  6. If your loved one had mortgage life insurance, their insurance company will pay the remainder of the mortgage on the home.
  7. If the mortgage had a co-signer, they will be responsible for making payments. If there is not a co-signer or someone before you in line to inherit the home, you can establish ownership if you wish to do so.
  8. If you have any questions about what inheriting a mortgage might do to your tax liability, Miles Tax Advisory is here to help.

Estate Planning with Miles Tax Advisory

If you are ready to explore estate planning or plan to minimize your tax liability this year, we are always here to assist you!