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Inherited Property: Options to Refinance, Buyout Heirs & More

Did you just inherit some property? If so, you have many options as to what you can do with this property. Get our guide to inherited property here.

Patrick Hicks

Patrick Hicks, @PatrickHicks

Head of Legal, Trust & Will

If you’ve recently inherited property, you might be wanting to educate yourself on the many options you have in regards to what you should do next. You have a lot to think about, and fortunately we’re breaking it all down here. Keep reading to learn more about:

  • What Happens When You Inherit Property with a Mortgage?

  • What Should You Do When You Inherit Property with a Mortgage?

  • Considerations for Making a Decision About an Inherited Property

  • Common Questions About What to Do With Inherited Property

What Happens When You Inherit Property with a Mortgage?

A loved one passed away and you’ve just inherited property. While you’re dealing with the emotional aspects of your loss, the financial aspects of handling the property are likely going to become a high priority for you. Although you may have inherited a house, the chain of events that follow will largely be based on two things: Are you an heir? Or are you the Executor of the estate?

As an heir, you’re subject to the will of the Executor of the estate, who has the right to qualify and switch the mortgage over to their name. As an heir, you’ll also have to work with any additional beneficiaries on how things will be distributed if there’s no Executor - or, you might need to have things decided in court by a judge.

What Should You Do When You Inherit Property with a Mortgage?

There are several things you can do when you’ve inherited a house with an existing mortgage. First and foremost, you’ll want to consider the responsibilities that come with the home, like the debt you may be assuming, or any tax liability. 

To help navigate the responsibilities (and often benefits) of home ownership, there are some things to keep in mind. You can:

  • Decide to turn the home into investment property and rent it out

  • Assume the mortgage yourself

  • Move into the home 

  • Attempt to buy out any other heirs

  • Sell the home

  • Keep the home as a vacation property

Considerations for Making a Decision About an Inherited Property

There are many considerations to think about if you’ve recently inherited a home. For example, you might need to understand the process of refinancing inherited property, or you may need to consider any tax liabilities you’ll be responsible for. Thinking about the following is a good starting point. 

Are you the Executor of the estate, or just an heir?

If you’re one of multiple heirs who’ve inherited a house, you’ll have to consult with the other heirs if there is no Executor. If there is an Executor, everyone must respect and follow the Executor’s decisions.

Are you solo beneficiary, or sharing the inheritance with others (i.e. siblings)?

If you’re the sole beneficiary, you won’t have to worry about percentages and buyouts if you choose to remain in the home. The only concern might be needing to deal with the Executor.

Are you interested in buying out other beneficiaries (or selling your share?)

If you have no interest in keeping the property, selling your share is an option.

What is the nature of your relationship with any shared beneficiaries?

If you’re not related to the shared beneficiaries, you might want to consider consulting an attorney. An experienced lawyer can help you work out any details on upkeep, maintenance and possibly selling or buyouts.

How much inherited debt is there on the mortgage, if any?

If there’s a large amount of inherited debt on the mortgage, it could add financial strain to your monthly cash flow. You should first consider how feasible keeping the property even is, given your current financial situation. 

Is your credit good enough to qualify for refinancing? 

If you’re wondering how to refinance an inherited property to buy out heirs or how to get a smaller mortgage payment, for example, you want to make sure you qualify to assume the mortgage in the first place.

Is there an open mortgage on the property?

If there’s an open mortgage, the interest rate may be high, potentially creating more expenses.

Is there a reverse mortgage on the property?

A reverse mortgage can put you in a difficult financial position, especially if you’re hoping to keep the home. This is because homes with reverse mortgages can often be upside down.

What are the tax liabilities of the inherited property? 

Knowing the tax liability of a property can help you determine if you can afford to keep the property.

What is the current condition of the property?

Depending on the condition of the property, you might be better off selling or working something out with the other beneficiaries (if there are multiple heirs).

What will ongoing maintenance and upkeep for the property look like? 

It may be expensive to maintain the property, depending on the size. This could become problematic if your personal debt and expenses are already high.

Once you have these (and probably more!) answers, you’ll feel more confident that you have enough insight to make an informed decision about what your next steps should be.

Other Common Questions About What to Do With Inherited Property

Most people who inherit property have specific questions about assuming ownership.  

How to Refinance an Inherited Property to Buy Out Heirs

A probate loan or cash-out refinance can be used when refinancing inherited property.

With a probate loan, the lender uses the anticipated inheritance as payment. The property is deeded to you and when the payout occurs, the lender receives the money. This is a detailed process that works similarly to a regular mortgage application in many ways.

A cash-out refinance requires existing equity in the property and the loan covers the difference. If you’re buying out the other heirs, this option might help cover the payout(s).

Can You Get a Mortgage to Buy Out Siblings?

It’s not uncommon to be able to obtain a mortgage for half of the value of the home, including closing costs. Note that you’ll probably have to go through the entire mortgage process to do this, though.

Can I Remortgage an Inherited Property?

A mortgage lender will be able to help you figure this out. Most often, if your credit is decent and you’ve got a reasonable debt-to-income ratio and can afford the new mortgage, you might be able to remortgage the property. But be’s a fairly detailed process that requires time, credit and patience.

Update Your Will to Include Your Inherited Property

If you’ve become the beneficiary of a new property, these tips can assist you in determining the steps to take and factors to consider when evaluating what to do next. Most importantly, make sure you update your Will and Estate Plan to include the new property. 

Trust & Will makes the process of creating or updating a Will, Trust or other parts of your Estate Plan simple, fast and affordable. You’ll be protected, and so will your new property, in no time.

Is there a question here we didn’t answer? Reach out to us today or Chat with a live member support representative!