When you inherit a house with a mortgage in California, federal law (Garn-St. Germain Act) prevents the lender from demanding immediate full repayment. You can assume the existing mortgage, refinance into your own name, or sell the property to pay off the loan. Mortgage payments must continue during this period to avoid foreclosure.

Inheriting a home with an outstanding mortgage adds a layer of complexity to an already difficult situation. Many heirs panic, worried the bank will demand immediate repayment they can't afford. Federal law actually protects you—but understanding your options is critical.

Your Legal Protections

The Garn-St. Germain Depository Institutions Act of 1982 is your friend. This federal law prevents mortgage lenders from calling a loan due or accelerating the balance simply because the property transferred through inheritance. The lender cannot demand full payoff just because the original borrower died.

However, this doesn't mean you can ignore the mortgage. Payments must continue on schedule. Miss payments, and the lender can begin foreclosure proceedings regardless of the inheritance situation.

Option 1: Assume the Existing Mortgage

If the existing loan has favorable terms (especially a low interest rate locked in years ago), keeping the mortgage as-is often makes sense.

To assume a mortgage:

1. Contact the loan servicer to notify them of the death
2. Provide death certificate and proof of inheritance
3. Request assumption paperwork
4. Continue making payments during the process
5. Complete assumption (servicer may update account but terms stay the same)

Pro tip: A 3.5% mortgage from 2020 is worth assuming even if you plan to sell. It keeps your costs low during the sale process.

Option 2: Refinance into Your Own Name

If you want to keep the property long-term, refinancing establishes you as the legal borrower and can access equity or adjust terms. You'll need to qualify based on your own credit and income.

When refinancing makes sense:

• You need cash for repairs, buyout siblings, or other expenses
• The existing loan balance is high relative to property value
• Current rates are lower than the existing mortgage rate
• You want to establish clean title in your name

Option 3: Sell the Property

If you don't want to keep the home, selling and paying off the mortgage from proceeds is often the cleanest solution. In most California markets, property values far exceed mortgage balances on homes purchased decades ago.

Special Case: Reverse Mortgages

Reverse mortgages are particularly complex for heirs. Unlike traditional mortgages, reverse mortgages become due when the last borrower dies or permanently moves out. Heirs typically have 6 months to repay the loan or sell the property.

Key points for reverse mortgage heirs:

• Reverse mortgages are non-recourse in California—you can't owe more than the home's value
• If the loan balance exceeds property value, you can walk away or pay 95% of appraised value to keep the home
• Contact the servicer immediately to start the clock on your timeline

Frequently Asked Questions

Can the bank foreclose during probate?

Yes, if payments aren't made. Probate does not stop the mortgage clock. Continue making payments to protect the property.

What if there are multiple heirs and one wants to assume the mortgage?

The assuming heir typically needs to buy out the others' shares or get their consent to take over the property and mortgage.

Does assuming a mortgage affect my credit?

The mortgage typically won't appear on your credit report unless you refinance into your name.

Related Guides

• What To Do When You Inherit a House
• Timeline: How Long to Sell Inherited Property
• Complete Guide to Selling Inherited Property in California

Inherited Property With a Mortgage?

The Borges Real Estate Team can help you understand your options.

📞 (213) 262-5092

Justin Borges

Justin Borges leads The Borges Real Estate Team in Pasadena, helping families navigate inherited property situations including those with existing mortgages. With over $200 million in career sales and deep expertise in LA County markets, Justin provides practical guidance for complex situations.