First: Probate Status

Before any mortgage decision, understand how the property is legally passing to you:

• Property typically passes through probate (a court-supervised process) unless it was held in a living trust or in joint tenancy with right of survivorship.
• Probate can take 6 to 18 months in some states and longer for contested estates.
• You generally cannot refinance the property until you are legally on title - either after probate completes, or once you are formally appointed as executor with authority to act.
• In the meantime, the existing mortgage still needs to be paid. The estate typically pays from estate funds until distribution.

Garn-St. Germain Act Protection

The Garn-St. Germain Depository Institutions Act of 1982 is a federal law that limits when a lender can enforce a due-on-sale clause. Several inheritance scenarios are explicitly protected:

• Transfer to a relative resulting from the borrower's death.
• Transfer to a spouse or child of the borrower.
• Transfer to a surviving joint tenant on the death of the other joint tenant.
• Transfer into a living trust where the borrower remains the beneficiary.

For these protected transfers, the existing mortgage stays in place at its original rate without the borrower having to re-qualify. If the deceased had a low-rate mortgage (3% or 4% from a few years ago), this is a substantial financial benefit relative to refinancing into today's rate environment.

Not legal advice. Consult an estate attorney for your specific situation.

Refinancing an Inherited Property

• You need to be on title first - typically after probate completes or once you are appointed executor with proper authority.
• Standard underwriting: your income, credit score, debt-to-income, and assets, plus the property's value and condition.
• Owner-occupied treatment if you plan to move in; investment property treatment if you plan to rent it out.
• Cash-out refinance is a common path when you want to buy out other heirs or convert built-up equity into liquid funds.
• Some lenders have a "delayed financing" exception that allows a refinance shortly after acquiring the property at full LTV, rather than waiting six months.

Cash-Out Refi to Buy Out Other Heirs

A very common scenario. Three siblings inherit, one wants to keep the property, the other two want their share in cash. The keeping sibling does a cash-out refinance to pay the others.

• Conventional cash-out is typically capped at 80% LTV on a primary residence and 75% LTV on an investment property.
• Some non-QM programs go higher, depending on the borrower profile and property type.
• The buyout amount needs to fit within the cash that can be pulled at the applicable LTV cap. If the equity is too thin, the keeping sibling may need to contribute additional funds.
• Title and the family agreement should be coordinated by an attorney to document the buyout cleanly. We work with lenders going to program minimums where allowed.

Tax Considerations

• Stepped-up basis. Inherited property generally gets a basis equal to fair market value on the date of death, not the deceased's original cost basis. This can be a meaningful tax benefit if you sell soon after inheriting.
• Capital gains on sale. Calculated against the stepped-up basis. A sale near date of death often results in little or no capital gain.
• State estate or inheritance tax. Varies by state. Some states have inheritance tax; some do not.
• Mortgage interest deduction. Available if you live in the property as your primary or second home, subject to standard IRS deduction limits.

Not tax advice. Consult a CPA and an estate attorney for your specific situation.

If There's No Mortgage on the Inherited Property

You can still do a cash-out refinance to pull equity from the inherited home. Common uses: renovation, debt consolidation, buying out other heirs, or funding a new property purchase. Same underwriting standards on you as the borrower - income, credit, assets, and DTI - plus the property's appraised value.