Dealing with a loved one’s death is never easy, and dividing their estate between beneficiaries is never as easy as it appears in films and TV shows. Things become even more complicated if your loved one still had debt, such as a mortgage.
Unfortunately, debt doesn’t just disappear when someone dies, especially if the debt was tied to an asset. Navigating this situation can be complicated, so we’ve put together this guide to take you through your options. Read on to learn how to deal with a home you’ve inherited with a mortgage.
When someone passes away with debt, their estate will need to settle their debts, i.e. pay them off. Mortgages aren’t often dealt with in the same way; instead, the mortgage is secured to the home. The deceased’s representative can continue to pay the mortgage from the deceased’s estate to maintain it.
If you then inherit the property, you are not responsible for the mortgage payments, but if they go unpaid the home will go into foreclosure. That means you need to decide what will happen to the home. Here are your options:
It’s legal and possible to pay someone else’s mortgage, even anonymously. There’s no legal requirement that the person paying the mortgage must be the one named on the mortgage. That means that you could simply pick up the mortgage payments and continue paying them, and move into the home. Be cautious here, as some mortgage contracts have clauses in them to stop people from doing this, so speak to an attorney to check that your plans aren’t going to get you into legal trouble if someone finds out.
You usually cannot transfer a mortgage into someone else’s name, but you can if it’s an assumable mortgage. If the deceased’s mortgage is assumable, you should be able to have it put in your name provided you meet their credit requirements. In some circumstances, you may be able to have your name added to the mortgage and continue paying it that way.
As above, continuing a mortgage once the person named on the mortgage has passed can be difficult contractually, so work with the mortgage company to see if there’s a suitable solution.
If you are financially able, consider getting a new mortgage for the property to pay off the deceased’s mortgage. If the home has plenty of equity and the mortgage amount left is relatively small, this can be straightforward. For example, if the deceased took out a 25-year mortgage 15 years ago, for $150,000, paid off half, and the property is now worth $365,000, you’ll be looking for a $75,000 mortgage on a home worth far more than that, so it’s a safe bet for mortgage companies.
If this is an option for you, speak to a mortgage broker to find out more about your options.
If you cannot continue paying for the property or you don’t want to live in the home, the simplest thing to do is sell it and release the equity. This will allow you to pay off the mortgage (as is legally required) and take the remaining equity as cash. This is often the most straightforward option.
One thing to be aware of if you plan to sell is that inheritance tax may apply – if you are here in Massachusetts, then you don’t need to think about taxes unless the property is worth over $1 Million.
If there is any sizable amount of equity left in the home, it’s best to avoid this option if you can. The only reason to allow a home to go into foreclosure if you are going to benefit from its sale ultimately is if you cannot afford the mortgage payments. Once you lose control of the sale, getting your equity will have to come through your deceased’s estate, so you may be waiting for some time. You’ll also likely find that the equity released for you is less than you hoped because the bank will simply be looking to get their money back – they won’t be looking to maximize your profit.
If the home isn’t going to make you any money and is just going to be a financial drain, then it may be best to simply let the home go into foreclosure for the bank to handle.
If you decide to sell the home to release the equity, then you need to think about the best strategy for your circumstances. Selling the home yourself allows you to maximize your profit from the sale because you can prepare the home for sale and aren’t relying on an uninterested mortgage lender to sell it for you. Here are some of the ways you can choose to sell an inherited home with a mortgage:
- Renovate and sell: If the home is old-fashioned but in a popular area, it may be worth your time and money to renovate the property before you sell it. Removing outdated wallpaper and colored bathroom suites can make a world of difference.
- Sell through a realtor: If the house is in good condition and should sell easily, then you may want to put it on with a realtor. Be aware that realtors’ fees will eat into your equity, but will be worth it if you’re able to negotiate a good sale price.
- Sell to a cash home buying company: If the home is in less-than-perfect condition and you’re not interested in renovating it, consider selling to a cash home buying company. Cash home buying companies (like us!) will buy a home in any condition for cash, making it the fastest way to sell your home.
Whether the home is in poor or perfect condition, selling to a cash buying company will ensure the entire sale is completed in a matter of weeks, rather than months. If you’re selling an inherited home with a mortgage in Massachusetts, we’re here to help.
Selling your inherited home with a mortgage in Massachusetts is easy with us – all you need to do is reach out to us with some information about the property and we’ll get back to you as soon as we can. We don’t do any in-depth home inspections and we’ll give you our best cash offer upfront.
You’re under no obligation to sell to us if we give you an offer, but if you agree to our offer we’ll get the ball rolling as soon as possible. In most cases, the sale is complete in just a few weeks, giving you the freedom to move on with your life and enjoy your inheritance!