Inheriting a house with a mortgage

Hey guys, this is Mike from Mike Buys Houses. I was recently speaking to a homeowner who was inheriting a house with a mortgage and he was wondering what he had to do now that he had this unexpected mortgage fall into his lap. He was considering selling his inherited house with a mortgage and thus reached out to us.

Paperwork for Inherited Houses with a Mortgage

When inheriting a house, collecting the paperwork as soon as possible is always the most advantageous path forward. It’s always super helpful to have all of the paperwork available if and when you need it. 

So things you are going to be looking for are: 

  • Mortgage payoff statements
  • Will Paperwork
  • Death certificate

Of course, if you are not sure what your next best step is, feel free to reach out to me at 267-984-4765 or fill out the form below. 

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Probate Process

Normally, in order to transfer the title of the property, you are going to have to go through the probate process. So, in the early days after you inherit a home with a mortgage, it is advisable to reach out to a local probate attorney to review your specific situation and identify if you will in fact need to go through the probate process. If you are inheriting a house with a mortgage it is vital to find out if you need to go thru the probate process.

Usually after someone passes away, the house is considered an asset of the estate, so the probate process is what allows you to take over that property. When you have inherited a house or an asset after the loss of a loved one, you’re also going to inherit the debts and the bills that go along with those assets. Typically, an inherited house is going to go through the probate process along with the rest of the assets and the liabilities of someone’s estate. At the end of that process, the estate’s assets and liabilities will be tallied up, to ensure that all the debts are paid off using the assets on hand. At that point, if the house needs to be sold to cover some debts, then that is something that could be explored. You could always cover those debts yourself if that’s something that you would want to explore as well. 

Once all the debts and the assets are calculated, the house is then able to pass on to the descendants, again, assuming that there’s no liabilities that need to be paid with that asset. 

Expenses with a Home with a Mortgage

Now that you have transferred the title and officially inherited the property, what are some of the basic expenses that you need to be aware of before deciding how you want to handle this house? There are more expenses to consider than you may initially think when you are inheriting a house with a mortgage.

The first and main expense is going to be the monthly mortgage payment, which is usually the main deciding factor on if you will want to keep the house or sell it. A lot of individuals simply can’t afford to be paying two mortgage payments a month, so checking over the mortgage statements and ensuring this is something you can afford is the first priority. Beyond this though, you will need to consider some basic homeowner expenses, such as: 

  • Taxes 
  • Utilities 
  • Trash 
  • Water 
  • Sewage 
  • Garbage 

After assessing the financials, the last major decision is what do you ultimately want to do with the property. Below are some of the best options available in most situations.

Move In to the Inherited Property

The first option that you have when inheriting a property with a mortgage is to move into it or use it as a family house. You will need to go through a paperwork process with the bank to transfer the loan over to your name. Then you will simply pick up making the monthly payments to the bank and treat it as one of your homes.

Rent Out the Inherited Property

The second option when inheriting property with a mortgage is to rent it out. When thinking about renting a property, what you’re going to do is take the projected rental income that you’re going to get and subtract out the principal and interest from the mortgage. Then subtract out all those monthly costs that we talked about to get your balance. 

As long as you can make more money then you are spending each month, this might be a really great option to get some additional income. However, remember that this means you will also get the headaches of being a landlord with that cash flow. This may make sense for you if you’re local to the property and interested in getting started in real estate. If that’s something that you’re considering, then I would highly recommend talking to a property management firm. They will help out a ton, or you can spend some time getting your feet wet with some information about what’s going on in your market. 

Remember when renting a property to account for vacancies, which typically you want to account for one month a year just to be safe. Also, repairs and capital expenditures need to be budgeted for. So, capital expenditures are going to be things like the roof, the water heater, the boiler, things that you know are eventually going to be worn out and need to be replaced. 

Selling an Inherited Property with a Mortgage

The third option is to sell it on the market. 

Some things to consider when listing an inherited property are:

  • What kind of condition is the property in and does it need updating? 
  • When was the last time the kitchen, bathroom, etc. have been updated? 
  • What is your timeline looking like?

The condition of the house is key, but also understanding your timeline and when you need to have the asset off your personal books is key. Listing with an agent might take a few weeks to months before you actually can close. Think like 90 days at least to close, even if the property is sold relatively quickly!

Plus, selling with a realtor can be costly, with an expectation of losing about 10% of the final sales price to commissions, fees, repairs, etc. 

Selling an Inherited Property via Terms

The fourth option a homeowner has is to sell it to a home buyer like me. 

If you’re looking for an easy sale on your property where you don’t pay any commissions, you have no closing costs to pay, no matter the home’s condition you will have no costs for repairs needed, and you won’t even need to clean it up, then selling to us here at Mike Buys Houses may be the best option for you. 

I can also offer you terms for your property, which means that I can pay you over time in installment payments, which allows me to pay the most amount of money for your property! 

I can offer you more than if you were to list it, while still providing you with the benefits of working with the home buyer like me, where you don’t have any of the closing costs and commissions, the repairs, anything like that. 

So if you’re looking for the best of both worlds, where you get the most money and you don’t have to worry about any of that headache or anything, then reach out to me at 267-984-4765 or fill out the form below. 

We look forward to helping you!

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