What Happens If I Inherit Property With a Mortgage?

October 9, 2017

One of the rights US citizens have is to bequeath their property to others. The right of inheritance applies to all property, including even properties with mortgages attached to them. For those inheriting a mortgaged property, though, a number of questions and concerns invariably pop up, including whether the mortgage can be assumed. Additionally, people inheriting mortgaged property often wonder how they'll record the deed and take title to the property.


Inheriting Mortgaged Properties


A mortgaged property can be inherited just like any non-mortgaged property. For inheritors of mortgaged properties, typical issues to address include taking the property's title and recording the deed to establish actual ownership. Also, mortgages on homes or other properties inherited by non-relatives usually can't be assumed. Mortgaged property inheritors generally need to make arrangements with the lenders to pay off those mortgages. Lastly, mortgaged properties can come with property taxes owed, liens attached and even estate taxes due.


Relatives Inheriting Homes


Relatives inheriting mortgaged homes only are allowed by the Garn-St. Germain Depository Institutions Act of 1982 to assume the existing mortgages. A relative assuming a mortgage on an inherited home must live in the home and also make all required payments, however. Relatives inheriting mortgaged homes and intending to assume their mortgages can also keep those mortgages in their deceased relative's name. Processes for relatives taking title and recording an inherited property's deed are generally the same as for non-relatives.


Other Inheritance Issues


Sometimes, after inheriting a property the inheritor will also be confronted by back property taxes and liens. The inheritor can hope the estate's executor addressed back property taxes and liens before passing on the property. Remember, mortgage liens, property taxes and other liens are attached to their properties, and they survive the death of their owners. People inheriting mortgaged properties frequently consult attorneys and financial planners for advice about handling them.




The reason people inheriting properties can't just assume their mortgages relates to those mortgages' due-on-sale clauses. Other than home exceptions for relatives and spouses noted in 1982's Garn-St. Germain law, almost no one else can assume an inherited property's mortgage. Persons inheriting mortgaged properties sometimes sell the properties or instruct the properties' mortgage lenders to just foreclose. Lastly, no one can be forced to take possession of anything bequeathed through inheritance.

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