Inheriting a House with a Mortgage or Reverse Mortgage

Quick Answer:
A mortgage doesn’t disappear when the owner passes away, and it usually doesn’t have to be paid off right away. Federal law generally lets a relative who inherits the home keep the existing loan in place. Heirs can keep making payments, assume the mortgage, or pay it off from the sale. A reverse mortgage comes due after the owner passes, and heirs can pay it off, refinance or sell, generally owing no more than 95% of the home’s appraised value on the most common type.

If you inherit a home with a mortgage, start by finding out what is owed and what the lender needs. That will help you decide whether to keep the home or sell it.

What Happens to a Mortgage When a Homeowner Passes Away?

The loan stays attached to the house. The estate, the trust or the heirs keep making the monthly payments until they decide what to do.

Start by calling the loan servicer, letting them know about the death, and asking for a payoff amount and the current balance. Keep paying on time while you make a plan. That protects the home’s value and your options.

Can Heirs Keep the Mortgage?

Usually, yes. A federal law called the Garn St Germain Act generally prevents a lender from calling the loan due just because the home passed to a relative after the owner’s death. Consumer protection rules also require servicers to work with heirs, called successors in interest, once they confirm their ownership.

How to Assume an Inherited Mortgage

If you plan to keep the house, assuming a mortgage after death, meaning taking over the existing loan, is often possible, and that loan may have a better interest rate than today’s. The steps usually look like this:

Notify the servicer and provide a death certificate.
Show your interest in the home, such as letters testamentary, a trust document or a deed.
Ask the servicer to confirm you as a successor in interest.
Request an assumption, if you want the loan in your name.

Each servicer has its own process, so ask for theirs in writing.

Selling an Inherited House That Still Has a Mortgage

If you decide to sell, the mortgage can usually be handled at closing. The house is sold like any other home, and the mortgage is paid off from the sale proceeds at closing. The heirs receive what’s left after the payoff and closing costs.

Keep making payments until closing, so the loan stays current. See selling a house in probate or selling a house in a trust for the full process.

What Happens to a Reverse Mortgage When the Borrower Passes Away?

A reverse mortgage generally becomes due after the last borrower dies or permanently leaves the home. An eligible surviving spouse may qualify to remain under the loan’s rules. When repayment is required, heirs may be able to:

Pay it off and keep the house.
Refinance into a regular mortgage.
Sell the house and pay off the loan from the proceeds.

On an FHA insured reverse mortgage (called a HECM), heirs who sell generally won’t owe more than 95% of the home’s appraised value, even if the loan balance is higher. If the home is worth more than the loan, the heirs keep the difference.

There are timelines to follow. The servicer usually asks heirs to respond within about 30 days and gives around six months to sell or pay off, with extensions possible when the family is actively selling. Reach out early and keep the servicer updated.

Frequently Asked Questions

Do I have to pay my parents’ mortgage after they pass away?

You aren’t personally responsible for a parent’s mortgage unless you co signed it. The loan is paid by the estate or from the sale of the house. If you want to keep the home, you’ll keep up the payments.

Can I take over my parents’ mortgage after they pass away?

Often, yes. Heirs can usually keep the existing loan in place and ask the servicer about an assumption.

What if the house is worth less than the mortgage?

Talk with the servicer and an attorney about options such as a short sale. With a reverse mortgage, the 95% rule usually covers this.

Who pays the mortgage during probate?

The estate keeps paying the mortgage, taxes and insurance until the home sells or transfers to the heirs.

If you would like to keep reading, I also cover taxes on inherited property, whether Medicaid can claim an inherited home and selling an inherited home.

About the Author

Jolene Baijot is a real estate agent and Designated Broker with more than 25 years of experience and over 1,000 transactions. She holds the Certified Probate Real Estate Specialist (CPRES) and Accredited Buyer’s Representative (ABR) designations and helps families sell inherited homes, including homes with mortgages and reverse mortgages. Learn more about how Jolene helps with probate and trust sales.

Deciding What to Do With the House?

Sometimes having a clearer picture of the home’s value and selling costs helps you decide. If you’d like, we can go through the numbers together.

This post is general real estate information. Your loan servicer, an attorney and a CPA can advise you on your loan and situation.