Inheriting a home is a blessing, but it comes with a number of financial obligations and your initial decisions can have long lasting effects. An experienced mortgage broker can help you evaluate your options, protect your equity, and choose the path that makes the most sense for you and your family.
A good place to start is answering these three questions:
- Do you want to keep the home?
- Do you need to buy out other heirs?
- Is there a reverse mortgage on the home?
Once you’ve answered those questions, our most important piece of advice is simple: you should keep paying the mortgage, taxes and insurance on the property. By staying up to date with the payments you will have more refinancing options and avoid paying penalties if you choose to assume the mortgage or sell the property. We appreciate that everyone’s situation is different, so we will go over a few different scenarios and can answer specific questions if you reach out via phone or email.
Can I Assume the Mortgage?
Yes, excepting reverse mortgages, federal law generally allows a related heir to assume the mortgage under the same terms. However, if the loan is delinquent, you will likely need to bring it out of delinquency before assumption.
Is Refinancing Right for Me?
Depending on your financial situation and the condition of the home, a refinance might be a better option than assuming the loan.
A rate-and-term refinance can:
- Provide the funds you need to pay other heirs for their share of the property.
- Lower your monthly payment.
With a cash-out refinance you can access your home equity to:
- Make improvements to the property.
- Consolidate your debts.
- Get cash for large purchases
What if I missed a payment?
Missing a payment can limit your options as most conventional, FHA, or VA loans require 12 consecutive on-time mortgage payments before approving a refinance. But non-qualified mortgages (Non-QM) are available for borrowers who have had recent financial troubles including missed mortgage payments.
You can learn more about Non-QM mortgages here, but briefly Non-QM loans are loans that are not insured by a government agency, so they have higher interest rates and lower loan amounts relative to the value of the property, but they also have more flexible underwriting standards.
Inheriting a Home with a Reverse Mortgage
If your loved one had a reverse mortgage, that means they had been receiving payments from a lender in return for equity in the home. That means the total loan amount has been going up. Those payments will cease but by the same token you will not have to make any monthly payments to the lender to stay current on the mortgage, though, you may need to renew the insurance policy or pay property taxes. Instead, you will have 6-12 months to pay the loan amount in full by refinancing or by selling the property.
We strongly recommend speaking to a mortgage professional as soon as possible to learn your options. Is it best to sell? Or maybe it’s in your best interest to wait the full 6-12 months to arrange your finances.
Summary
- Learn if there is a reverse mortgage on the property.
- Stay current on mortgage, tax, and insurance payments if possible.
- Speak to an experienced mortgage professional as soon as possible.