Orange County Estate Planning Lawyer Answers, Can You Inherit a House with a Mortgage?

Many people expect to pay off their mortgage within a predetermined time frame or sooner. Unfortunately, some pass away before they have the chance to meet that goal. If someone dies before paying off their debt, the person who inherits the property becomes responsible for the unpaid portion of the mortgage. 

Mortgages are different from most debts in estates. Typically, the executor or administrator pays back creditors. If there are sufficient assets in the estate, the executor may pay off the house. If there are not, the mortgage goes to the inheritor along with the house.

Even though someone is not obligated to take on another person’s mortgage unless they’re a co-borrower or co-signer, the lender might come after the inheritor. The lender could decide to foreclose on the home if they don’t continue receiving payments after the original borrower’s death.

Options After Inheriting a House with a Mortgage

Your Orange County estate planning attorney wants you to understand that although inheriting a family member’s home could positively affect your financial standing, it could also cause stress if you discover your inheritance involves a mortgage. You must carefully consider the available options if you suddenly face an unpaid mortgage when your loved one passes away.

Sometimes, an estate plan outlines how to handle the mortgage, so the beneficiary knows what to do. There might also be an asset in the estate the beneficiary inherits that is specifically intended to pay off the debt. However, if you discover your family member didn’t leave behind a helpful plan, you must consider other options.

The most common options you can choose from after inheriting a home with a mortgage include the following:

  • Take on the mortgage – You must contact the lender if you decide to keep the house. Pretending the mortgage doesn’t exist can result in foreclosure. The lender will inform you of the documents you must provide to prove you inherited the home. They might also advise you about your options for making the required payments.
  • Pay off the debt – You could pay off the remaining mortgage balance if you have the money. You might be able to sell other inherited assets from the estate and use the proceeds to satisfy the loan. Paying the owed amount means you will own the home outright and no longer have this financial obligation hanging over you.
  • Request a loan modification or refinance – You could ask the lender to modify the current loan. Maybe the required monthly payments are too high for you to afford. A modification could bring the payments down to a number you can handle, so you don’t lose the home. Applying with the bank to refinance the mortgage is another option.
  • Sell the home – Selling inherited property is the most beneficial choice for many people. This may be true for you, too, especially if you don’t want to keep it or can’t afford the mortgage. You can use the proceeds from the sale to pay the remaining balance of the loan.
  • Rent the home – Another option you should consider if you inherit a house with a mortgage is renting it out to tenants. It could become a lucrative source of income, and the rent could cover the monthly mortgage.

Talk to an Orange County Estate Planning Lawyer to Learn More

Inheriting any asset from a loved one could help you maintain financial security. However, some assets come with baggage and require you to explore various solutions to avoid economic struggles.

You should contact us immediately if you’ve inherited a house with a mortgage and need to find out the options available to you. We can review your situation and determine the most appropriate method to meet your needs and interests.  To schedule an appointment with one of our Orange County estate planning lawyers, or at one of our other offices located throughout the state of California, simply call (800) 244-8814.

If you have any further questions about asset protection planning and strategies to shield your wealth, or if you’d like to have your current asset protection plan reviewed to make sure it still meets your needs, please contact us at our California asset protection office at 800-244-8814 to set up a consultation.

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