How to Finance an Inherited Property
This is an interesting scenario. Oftentimes, when we think of property inheritance, we assume that we would be receiving it free and clear of any mortgage. But…what happens when you have inherited property that does have a mortgage on it? What to do? What if you cannot afford to pay it’s mortgage, property taxes, and other fees?
Myers Capital just sent out information on this very subject. I got written permission to share it with you. Please feel free to reach out to them. Their contact info is below. Also please consult your tax accountant and/or tax attorney for any questions regarding your estate and tax consequences. This blog is for general information purposes only and does not take into consideration your specific situation. Also note that loan programs and mortgages may differ.
From Myers Capital:
Here’s How to Finance a Property with a Mortgage
You’ve inherited a property and you and other heirs have decided to keep the home. Inheriting property can bring numerous legal, financial, and familial challenges in addition to dealing with the loss of a loved one. You may need to work with legal and financial professionals to navigate probate procedures before your share of the asset can be claimed.
Here are ways to finance the home that could include funds to buy out your heirs or pay liens and debts associated with the property:
Legal heirs can assume a mortgage of the decedent and continue to make monthly payments. However, if there’s a living co-borrower or co-signer, this party is responsible for making payments regardless of whether they have an ownership interest in the home. In this case, the heirs would need to find another financing option.
Investment Property Loan
If you want to use the home as a rental, a rental property loan can help you finance the home while earning passive income, tax benefits, and property appreciation. Loan programs like DSCR (Debt Service Coverage Ratio) are available that allow borrowers to qualify based on the cash flow of the property versus personal income.
Refinance the current mortgage with another with a better interest rate or different term (15 years versus 30 years). A home with a reverse mortgage can be refinanced to cover the outstanding balance.
Acquire a mortgage that is higher than the current home loan and use the additional funds to make needed improvements, pay off debts/liens associated with the home, or to purchase another property.
TIP: Whether you plan to live in, rent or sell the home, it’s important to not delay as holding expenses like the current mortgage, taxes, and insurance will accumulate.
We are experts in helping clients who have inherited property to come up with solutions that best fit their situation and goals.
Above information brought to you by:
Myers Capital Hawaii
841 Bishop Street, Suite 2100
Honolulu, Hawaii 96813
Myers Capital Hawaii, LLC, is a licensed mortgage lender, an Equal Housing Lender, and holds the following licenses, and related DBA (doing business as) names: Hawaii–DBA Myers Capital Hawaii, 1662480; California-DBA Myers Capital, Licensed by DFPI under the California Residential Mortgage Lending Act, California Finance Lender License 60DBO-152146; Idaho–DBA Myers Capital, Idaho Mortgage Broker Lender License MBL-2081662480; Virginia–DBA Myers Capital Virginia, Lender License and Broker License MC-7394; Washington–DBA Myers Capital, Washington Consumer Loan Company License CL-1662480.
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