Inherited a House with a Mortgage You Can't Afford?
First, Take a Breath
Inheriting a house while grieving is overwhelming. You have time to make decisions, and you have more options than you might think. Let's walk through this together.
When you inherit a house with a mortgage, you're suddenly faced with decisions you never expected while dealing with the loss of a loved one. It feels like a burden on top of grief.
Here's the most important thing to understand right away:
You Don't Automatically Inherit the Debt
In California, you are NOT personally responsible for the deceased's mortgage. The debt stays with the property, not you. If you don't want the house, you can walk away without owing anything. If you DO want to keep the house, you have several options.
Your First Steps
Look for mortgage statements in your loved one's paperwork. Contact the loan servicer with the death certificate.
Were payments behind? Look for Notice of Default letters. Check the county recorder for recorded notices.
Get a rough idea: Zillow estimate, recent neighborhood sales, or ask a real estate agent for a quick assessment.
Can you afford payments? Do you want to live there? Would you rent it? Or would selling make more sense?
Your Options Explained
Option 1: Keep the House (Assume the Mortgage)
Federal law lets you take over the existing mortgage without qualifying for a new loan. Keep the same rate and terms.
+ Keep old rate (possibly lower than today's rates)
+ No new loan qualification needed
- Must be able to afford payments
Option 2: Sell the House
Sell the property, pay off the mortgage, and keep any remaining equity. You don't have to be able to afford payments.
+ Walk away with cash if there's equity
+ Clean break from the property
- Takes time to sell traditionally
Option 3: Rent the Property
If the property can rent for more than the mortgage, keep it as an investment and use rent to make payments.
+ Build wealth over time
+ Keep property in family
- Landlord responsibilities
Option 4: Let It Go
If the house is underwater (worth less than owed) or you simply can't/don't want to deal with it, you can walk away.
+ No obligation to pay
+ No personal liability in most cases
- Lose any potential equity
If There's Equity (House Worth More Than Owed)
If your loved one had significant equity, you have a valuable asset. Your priority should be preserving that equity.
Act Quickly to Protect Equity
If payments aren't being made, the house will eventually go to foreclosure auction. At auction, you lose control and may not get full value for the equity. Selling before auction - even a quick sale - puts YOU in control of the outcome.
Options When There's Equity:
- Sell traditionally: List with an agent, get top dollar (but takes 3-6 months)
- Sell to a cash buyer: Close in weeks, get less but faster (good if foreclosure is looming)
- Assume the mortgage: Keep the house and the equity, if you can afford payments
- Refinance: Get a new loan in your name, possibly pull out cash
If It's Underwater (Owed More Than It's Worth)
If the mortgage balance is higher than the property value, your calculus is different. You have less to lose by walking away.
California is (Mostly) Non-Recourse
For purchase-money mortgages on your primary residence, California is a "non-recourse" state. That means even if the house sells for less than owed, the lender typically can't come after you for the difference. (This may not apply to refinances or second homes - consult an attorney if unsure.)
Options When Underwater:
- Walk away: Let it go to foreclosure - you won't owe the deficiency
- Short sale: Sell for less than owed with lender approval
- Deed in lieu: Voluntarily surrender to avoid foreclosure
- Negotiate with lender: Some may accept less to avoid foreclosure costs
What About Reverse Mortgages?
If your parent had a reverse mortgage (HECM), different rules apply:
- The loan becomes due when the borrower dies or moves out
- You typically have 30 days to respond to the servicer's notice
- You can request extensions (usually up to 1 year total)
- Reverse mortgages are non-recourse - you won't owe more than the house is worth
Reverse Mortgage Heir Options:
- Pay off loan, keep house: Pay the balance or 95% of appraised value (whichever is less)
- Sell the house: Keep any proceeds above the loan balance
- Deed in lieu: Walk away if it's underwater
Is It Already in Foreclosure?
If your loved one was behind on payments, foreclosure may have already started. Here's the California timeline:
California Foreclosure Timeline
Key insight: Even if foreclosure has started, you likely have 3-6+ months to act. That's enough time to sell, negotiate, or figure out another option.
Getting the Information You Need
To Contact the Loan Servicer:
- Death certificate
- Proof you're an heir (will, probate documents, or affidavit)
- Your contact information
Don't Forget to Check For:
- Second mortgages or HELOCs
- Property tax liens
- HOA dues (can be significant)
- Home insurance status
Overwhelmed? We Can Help.
Dealing with an inherited property while grieving is hard. We help California families navigate these exact situations - whether you want to keep the house, sell quickly, or figure out your options.
Call (949) 565-5285Free, no-obligation consultation
Common Questions from Heirs
"Do I need to go through probate?"
It depends on how the property was titled. If it was in a living trust or held as joint tenancy with right of survivorship, you may avoid probate. Otherwise, you likely need to go through California probate or use a small estate affidavit if the estate qualifies. Consult a probate attorney for your specific situation.
"How long do I have to make a decision?"
If payments are current, you have time. If payments have stopped, the foreclosure clock is ticking. Most heirs have 3-9 months from the first missed payment to make decisions, but acting sooner gives you more options.
"Can I sell the house before probate is finished?"
In California, you may be able to sell with court confirmation during probate. Some situations allow for simpler transfers. A probate attorney or title company can advise on your specific case.
"What if multiple heirs inherited the property?"
All heirs generally need to agree on what to do. If you can't agree, you may need to petition the court for a partition sale. This is a common and unfortunately complicated situation - try to reach agreement if possible.
Remember: You Have Options
Inheriting a house with a mortgage can feel like inheriting a problem. But it doesn't have to be. Whether there's equity to preserve, a foreclosure to navigate, or a decision to make about keeping vs. selling, there are paths forward.
Take it one step at a time. Get the information you need. And remember - you don't have to figure this out alone.