Can an Heir Assume the Loan on an Inherited Property?

Assume a Loan Without Qualifying

Can Heirs Assume the Loan on an Inherited Property?

When inheriting property, many heirs wonder: Can I take over the existing mortgage? The answer is often yes, thanks to provisions in the Garn-St Germain Depository Institutions Act of 1982, which allows qualified heirs to assume certain residential mortgages without needing to refinance or triggering a due-on-sale clause.

Understanding the Right to Assume a Mortgage

The due-on-sale clause in most mortgage agreements typically requires the loan to be paid in full if the property is transferred. However, under the Garn-St Germain Act, this clause does not apply if:

• The property is a residential home with four or fewer units.

• The deceased borrower was a natural person.

• The heir inherits the property directly and plans to live in it as their primary residence.

This exception can save heirs from the hassle of refinancing at a higher interest rate or paying costly closing fees, making it easier to retain a family home.

Things to Consider Before Assuming a Mortgage

While you may have the right to assume a mortgage, it doesn’t always mean you should:

1. Shared Ownership: If multiple heirs exist, you may need to compensate others for their share of the home, potentially requiring refinancing.

2. Financial Feasibility: Make sure you can afford the monthly payments, taxes, and insurance. Defaulting could harm your credit.

3. Loan Terms: Compare the current mortgage terms with potential refinancing options; better interest rates or conditions might be available.

What if the Lender Gives You the Run Around?

When contacting the lender, they may transfer you to the assumption department who will probably tell you the loan cannot be assumed. Don’t be fooled – you are simply talking to the wrong person. Ask for the person who handles the “Successor in Interest” files. This will get you to the expert who deals with inherited properties. If they still won’t help you then reference the Garn-St Germain Act. This will show them you know your rights and will likely set you on the right course.

Seek Professional Guidance

Managing an inherited property and mortgage can be complex. Consult with a probate professional to evaluate your rights and options. Understanding the legal and financial implications can help you make informed decisions about the property’s future.

If you're navigating the inheritance of probate real estate in the Phoenix metro area and need assistance, reach out to learn how we can help guide you through the process. We are real estate probate specialists ready to serve you in the Phoenix, Arizona area.