How to refinance an inherited property to buy out heirs

When a family inherited a house, it may create conflict among the siblings as one heir may wish to maintain ownership of the real estate while others want to sell their share of the inherited property and receive cash. This issue typically results in the heir who wants to maintain ownership looking for a way to refinance the inherited property to buy out the other heirs (beneficiaries, siblings). If the heir who wants to keep the property doesn’t have the cash to buy out their sibling’s interest in the inherited house they must pursue some type of refinancing for the inherited property. The heirs must come to an agreement on the value of the real estate and what amount of funds each heir will receive prior to refinancing the inherited property.

Refinancing inherited property generally isn’t as easy going to the bank to receive a conventional mortgage. Inherited property is typically in the name of the estate (probate) or executor. Getting a mortgage on an inherited property isn’t possible in most situations as banks will not provide a loan to a borrower who does not own the house yet. Refinancing a property with multiple heirs isn’t the type of loan request a bank is able to fund.

Probate Loans, Estate Loans & Trust Loans

Experienced Private money lenders (also known as hard money lenders) with the needed expertise understand how to refinance an inherited property to buy out heirs.

These types of loans are commonly referred to as:

• Probate loans or estate loans – The real estate is part of an estate and going through probate

There are various other names such as inheritance loans, estate inheritance loans, inheritance advance, probate advance. Though the names are different they all do the same thing and provide a way to buy out your siblings.

The hard money lender is able to provide a loan directly to the sibling who wishes to maintain ownership of the property. The proceeds from the loan will go to the heirs who are selling their share of the inherited property.

Hard money lenders can tailor an agreeable loan of the inherited property. Their interest rates are higher than conventional bank loans but hard money lenders have much more flexibility and are able to approve and fund loans very quickly.

Once the refinance on the inherited property is completed, the title of the property can be transferred from the estate or trust to the heir who now owns the property. At this point, the heir will be able to apply for a long-term and lower interest rate loan from a conventional lender.

Property Tax Considerations on Inherited Rhode Island Property

When refinancing inherited property it is advised to consult an attorney or tax professional to ensure that the transfer of the property from the trust or estate to the heir is done in a way that preserves the existing tax assessment value with the parent to child exclusion. Ensuring that the property is not reassessed for property tax purposes can end up saving the heir who maintains ownership of the property thousands of dollars each year. 

Inherited House with No Mortgage

Inheriting a house with no mortgage provides the maximum amount of equity to divide among the heirs or siblings. A free and clear property often provides the best opportunity to obtain an estate loan to buy out siblings. This is essentially a home equity loan on the inherited property.

Inherited Property with an Existing Mortgage

Inherited property with an existing mortgage in most cases can be borrowed against with a second mortgage or equity-type loan.

If the inherited property has a reverse mortgage it will be necessary to refinance the reverse mortgage. Reverse mortgage lenders can be very aggressive and may start to threaten foreclosure as soon as the reverse mortgage borrower is deceased or moves out of the home. In many cases, there will no equity at all on houses with reverse mortgages. If this is your situation consult with a competent Rhode Island real estate attorney.

Where Can I Obtain a Refinance Loan on an Inherited Property?

I Buy Rhode Island Houses can help you in most cases providing hard money loans to buy out your siblings in some instances actual partner with you providing necessary cash for siblings buyouts.

Feel free to reach out to JB at I Buy Rhode Island Houses for a free no-obligation chat to discuss your inherited house options. Visit my Website or call 401-354-1485.