What to Do if You Inherit a Home

September 28, 2023
Homeownership sometimes comes in an unexpected way. If you’ve recently inherited a property and are unsure of how to proceed, here are some tips to get you started on managing the process.

So you found out that you’ve inherited a home — now what?

Inheriting a house can be a complex process, so it’s important to do your research and consult with professionals before making any decisions. Seeking the expert advice of a tax advisor, financial consultant, and/or a lawyer is highly recommended. 

In most states, you won’t immediately own the home; it will need to go through probate first, and once all legal processes are complete, your name will be recorded on the home’s deed. 

While each situation is unique, here are a few high-level pointers to get you started: 

  1. Talk to the executor first: The executor is the person designated by a judge to carry out the deceased person’s will. They may have essential information that you can bring to your financial advisor and/or lawyer. 
  2. Find out if there are any co-inheritors: You must come to an agreement with these individuals on what to do with the home. 
  3. Have the home appraised: The value of the home may impact your decision on what to do with the property. This is especially important if you have co-inheritors, because you’ll need to determine the home’s worth if one of you is going to buy out the others. 
  4. Consider any outstanding debts on the inherited property (tax liens, mortgage): Again, this will have significant influence on your decision. If the home has a reverse mortgage as a lien, be sure to contact the lender/servicer within 30 days of the date of death. Failure to do this may result in the loan going into default, which you obviously want to avoid. You will have up to 12 months after you notify the lender to pay off the reverse mortgage. 
  5. Weigh the immediate financial responsibilities: Even if there’s no mortgage, you’ll still need to maintain the home and pay utilities, property taxes, homeowners insurance, and any urgent/necessary repairs to make the home habitable.
  6. Make your decision for the property: You can sell the home, keep it and live there, or keep it and turn it into a rental/investment property. If you decide to sell the house, determine the capital gains tax liability that has accrued. Depending on the value of the home, you may need to pay capital gains taxes.  

Now let’s say that you decide to keep the property, but it still has outstanding debts (tax liens or a mortgage payment). You may consider these options for financing the home: 

  • Mortgage assumption (you may be able to assume the existing mortgage that the deceased person was paying; contact the lender or servicer to see if the loan provides for assumption 
  • Purchase loan (you get a new mortgage on the home)
  • Cash-out refinance (you access the home’s existing equity) 
  • Investment property loan (you turn the home into a rental property) 

All in all, inheriting a home definitely has its benefits. You may be able to use the equity to contribute to your long-term financial goals. Again, we highly recommend consulting with a financial or legal professional about the details, so you can make the most of your new asset.  

The information provided above is intended for informational purposes only and in no way constitutes legal advice or credit counseling.