I Inherited a House With a Mortgage. What Do I Do?

If you’ve inherited a house with a mortgage, you’re probably wondering what happens next. Do you have to keep making the payments? What happens if the mortgage isn’t paid? Can the bank foreclose? And how do you actually sell the house?

These are all important questions, and they’re especially important when you’re dealing with probate at the same time.

I’m Brad, the Probate House Guy. I’m an active real estate investor and a licensed real estate agent in the state of Georgia. Over the last 10 years, I’ve helped more than 300 sellers get their properties sold, whether that meant buying the property for cash or helping them sell it the traditional way.

I’ve learned a thing or two about probate and inherited property over the years, so let’s talk about what happens when you inherit a house that still has a mortgage on it.

And just to be clear, I’m not an attorney, so don’t take anything in this article as legal advice. Every situation is different, and you should talk with a probate attorney or real estate attorney about your specific circumstances. Pasted markdown

First, Find Out Who Holds the Mortgage

The first thing you want to do is figure out who the existing mortgage is through.

Maybe you already know. If so, you’re one step ahead.

But if you don’t know who the mortgage lender is, go through the records belonging to the person who passed away. Look for mortgage statements or other documents that might tell you which company holds the loan.

There’s another option, too.

Depending on where the property is located, you can search the county’s deed records using the name of the deceased. Look for a document called a security deed.

If you find a security deed that hasn’t been canceled or released, it will generally identify the mortgage company. From there, you can reach out to that lender.

Now, the company listed on the security deed may not actually be the company servicing the mortgage today. Mortgages can get transferred or serviced by different companies.

But if you contact the lender and explain, “Hey, there’s a mortgage on this house, and it’s through you guys,” they should be able to point you in the right direction.

Notify the Mortgage Company That the Homeowner Has Passed Away

Once you’ve identified the lender, you’ll want to notify them that the homeowner has passed away.

They may already know.

Sometimes mortgage companies receive information through public records or other sources when someone dies. But that doesn’t always happen immediately, so it’s a good idea to contact them yourself.

Now, don’t be surprised if the mortgage company doesn’t give you a lot of information right away.

If you’ve already gone through probate and you have your Letters Testamentary or Letters of Administration, that can make a big difference.

The lender will likely want you to provide a copy of those documents. Once they have them, they can update their records and establish that you’re authorized to speak with them about the mortgage.

If you’re still in the middle of probate, let them know that, too.

You can explain that the homeowner has passed away, the estate is going through probate, and the property may ultimately be sold.

Make Sure the Mortgage Payments Stay Current

This is a big one.

You want to make sure the mortgage payments continue to be made during the probate process.

Ask the lender questions such as:

• Is the mortgage currently set up for automatic payments?
• Can I establish online access?
• How can payments be made while the estate is going through probate?
• Is there a local branch where payments can be made?
• What information do you need from me to manage the account?

The reason this matters is simple: if the mortgage payments stop, the loan can go into default and the foreclosure process can eventually begin.

And that’s not something you want to ignore while you’re trying to get the estate settled.

Is It a Regular Mortgage or a Reverse Mortgage?

There’s another important question you need to answer: Is this a regular mortgage or a reverse mortgage?

Those two situations can be handled differently.

With a reverse mortgage, the loan generally becomes due when the borrower dies. Brad explains in the video that, in these situations, you typically need to notify the lender and deal with the property within the timeframe provided by the lender.

He also points out that if probate or the sale takes longer than expected, there may be options for requesting additional time.

Maybe probate is taking longer than you thought.

Maybe the house has been sitting on the market.

And, as Brad puts it, houses can sit on the market longer than they have in the past.

So if you’re dealing with a reverse mortgage, make sure you understand the lender’s timeline and what you need to do to avoid the situation turning into a foreclosure.

Need Help With an Inherited House With a Mortgage?

If you’ve inherited a house with a mortgage and you’re trying to figure out what your options are, we’d be happy to talk with you about it. Simply fill out the form on this page. A member of our team will be in touch with you as soon as possible.

What Happens If a Regular Mortgage Goes Into Default?

Now let’s say it’s just a regular mortgage.

You still need to make sure the payments are being made.

If they aren’t, the loan can eventually go into default and the lender can begin the foreclosure process.

In Georgia, there is a process the lender follows.

For example, if a mortgage payment is due on September 1 and it hasn’t been paid, by October 1 the payment is 30 days delinquent.

At that point, the lender can issue a notice of delinquency.

Brad explains that many lenders will wait until around the 60-day mark before formally beginning the foreclosure process, although this can vary by lender and situation.

Once foreclosure begins, there are additional notices and requirements involved.

The lender may send notices by certified mail, and notices may also be published according to the applicable foreclosure requirements. Eventually, the property can be scheduled for a foreclosure auction.

In Georgia, that can mean the property is scheduled to be sold at auction on a specific date.

The important thing is that you don’t want to wait until you’re at that point before figuring out what to do.

Can You Pay the Mortgage Yourself During Probate?

Here’s where things can get a little complicated.

What if you’re the administrator of the estate, but you don’t have access to the deceased person’s bank accounts yet because probate hasn’t been completed?

One possible option is making a mortgage payment using your own personal money and then seeking reimbursement from the estate later.

Brad is very clear that this is something you should discuss with an attorney before doing it.

If you do make payments personally, keep a clear paper trail documenting what you paid so there’s a record for the estate.

Of course, you may not have the money available to do that. And Brad acknowledges that many people simply don’t have the ability to make mortgage payments out of their own pocket.

But if you do have the ability, it may be an option worth discussing with your attorney.

What If the Deceased Already Had Automatic Payments Set Up?

There may be an easier solution.

If you have access to the deceased person’s existing online mortgage account or payment information, and there’s sufficient money available in the appropriate account, the mortgage may already be set up for automatic payments.

Brad shares that he personally has his own mortgage on automatic payments because, as he puts it, sometimes life gets busy and you forget to make the payment—even when you have plenty of money in the bank.

So, if automatic payments are already set up, make sure you understand what’s happening with that account during probate and that the mortgage payments continue as appropriate.

The main thing is to avoid accidentally letting the mortgage fall behind simply because nobody was monitoring the payments.

How Do You Pay Off the Mortgage When You Sell the Inherited House?

Eventually, you may decide to sell the inherited property.

That could mean selling it to a real estate investor for cash or listing it on the traditional market with a real estate agent.

Once you have the necessary probate documents and you’re legally able to proceed with the sale, the closing process can take care of the mortgage payoff.

For example, let’s say you get a contract on the house.

Whether the buyer is an investor or you found a traditional buyer through a real estate agent, the closing attorney will contact the mortgage company and request a payoff statement for the loan.

You may need to sign a payoff authorization as the executor or administrator of the estate.

The closing attorney then obtains the payoff amount from the lender.

When the transaction closes, the mortgage is paid off from the proceeds of the sale, typically through the closing process.

The buyer gets the house, the lender gets paid, and the remaining proceeds—if there are any after all applicable expenses and debts—are handled as part of the estate.

That’s ultimately how the mortgage gets taken care of when you sell an inherited house.

What Should You Do If You Inherited a House With a Mortgage?

If you’ve inherited a house with a mortgage, the biggest things to remember are:

1. Find out who the mortgage lender is.
2. Notify the lender that the homeowner has passed away.
3. Provide your Letters Testamentary or Letters of Administration when available.
4. Find out how mortgage payments need to be handled during probate.
5. Determine whether the property has a regular mortgage or reverse mortgage.
6. Keep the mortgage current whenever possible.
7. Understand what happens if the loan goes into default.
8. Work with your attorney and closing attorney when you’re ready to sell.
9. Make sure the mortgage payoff is requested as part of the closing process.

The big thing is not to ignore the mortgage.

If you’ve inherited a house, there are already plenty of moving parts with probate, the property itself, and the estate. Adding a mortgage that’s falling behind can create another problem you really don’t need.

Thinking About Selling Your Inherited House?

If you’ve inherited a house with a mortgage and you’re considering selling it, we can help you understand your options.

We’ve helped more than 300 homeowners over the last 10 years sell their properties, including homeowners who wanted to sell for cash.

If you’d rather go the traditional route, Brad is also a licensed real estate agent in Georgia and can talk with you about that option as well.

So whether you’re thinking about selling an inherited house for cash or selling it traditionally, just fill out the form below, a member of our team will be in touch with you as soon as possible.

And remember, if you’re dealing with an inherited house with a mortgage, make sure you understand the mortgage, stay on top of the payments, and talk with the appropriate professionals about your specific probate situation.