Losing a parent doesn't mean that you have to lose the family home. If you gain ownership of the house, but it is subject to a mortgage, your rights are still protected. Under the Garn-St. Germain Depository Institutions Act of 1982, one of the many limitations on lenders is that they can't prevent a heir from taking over a mortgage on an inherited house.
Right After Death
After your parent dies, someone will be responsible for distributing his assets in accordance with his will or with the terms of his trust. If he has no estate plan, a probate court will be responsible for figuring out who gets what. During this period of time, the trustee or executor of your parent's estate will use the estate's money to make the mortgage payments and keep the house up unless there is some other arrangement.
Taking Over the Mortgage
Once you get ownership of the house, you have the right to take over the mortgage as long as you plan to occupy the house. You can notify the lender in writing that you'll be taking over the payments and you may need to provide a death certificate to prove your rights to the property. However, the lender can't do anything about it. It can't even charge you a fee for assuming the mortgage.
When you inherit a house with a mortgage, you also inherit the original mortgage owner's responsibilities. If you don't make the payments, you can be foreclosed on. Not paying the property taxes could also put you in a situation where you lose the house. The mortgage may also require you to keep up a homeowner's insurance policy and the lender can foreclose if you don't follow that requirement.
Help! I Can't Afford It!
If you inherit a house with a mortgage and you can't afford the payments, you have another option. You can sell the house, use the proceeds to pay off the mortgage and keep any equity for yourself. If the house is upside down and your parent owed more than it was worth, the lender could possibly go after other assets in the estate to pay the deficiency. In this situation, getting help from a lawyer might be a good idea.
- Photodisc/Photodisc/Getty Images