Start by keeping the payments coming, finding the original documents and confirming who now has the legal right to collect. The choice between keeping the note and selling it can wait until you know what the note is and what it pays.
What you have inherited
A mortgage note is a borrower’s written promise to repay a loan, with a property standing behind the promise. The person who died sold a property, or lent against one, and was being repaid month by month. You are now in their position as lender. The payer still owns the property. What has passed to you is the right to the payments and the lien, which is the legal claim that lets a lender recover the debt from the property if the payer stops.
The first jobs, in order
The early weeks have more in them than this, and the longer account is in what heirs should do first with an inherited note. These are the jobs that cannot wait.
- Keep the payments flowing. Write to the payer about the death and say where payments should go for now. The estate’s attorney will tell you where that is, and it may be an estate bank account until ownership is settled. Ask the attorney before depositing any check made out to the person who died.
- Find the papers. You are looking for the original signed note, the recorded mortgage or deed of trust, the settlement papers from the original sale and any record of payments received. Try the safe deposit box, the home files and the attorney or title company that handled the sale.
- Confirm who can act. Until the note is formally transferred, authority generally sits with the executor or administrator of the estate, or with the trustee if the note was held in a trust. How and when it reaches you depends on the will, the trust and state law, which makes it a question for the estate’s attorney.
Work out what the note pays
The note and the payment record together give you the monthly payment, the interest rate, the number of payments left, the balance still owed and whether the payer is up to date. Those facts are where a buyer’s view of an inherited note begins, and you will be deciding from them too.
| What to find | Where it is |
|---|---|
| Payment amount, rate, start date, term | The note itself |
| Balance still owed | A payment ledger, a servicer statement, or an amortization schedule |
| Whether payments are on time | Bank statements of the person who died |
| Whether taxes and insurance are paid | The county tax office and the insurance policy |
Keeping it, selling it, or selling part
An inheritance is one of several situations that lead people to sell a note, but it does not oblige you to. If the payer is reliable and monthly income is useful to you, the note may be worth more held than sold, and a loan servicer can do the collecting for a fee. An heir with no use for a lump sum gives up money by selling and gets nothing they needed in return.
A full sale pays you a single sum for all the remaining payments. The price will be below the balance owed, because the buyer is paying today for money that arrives over years. It suits heirs who need to divide cash or who do not want to be lenders.
Between the two sits a partial purchase, in which you sell a set number of upcoming payments for cash and the rest of the note comes back to you later. Whether a buyer will agree to one depends on the note, chiefly on how steady the payer’s record has been.
If an offer arrives early
Probate filings are public, so an offer for the note can reach you before you have found the paperwork. One offer on its own cannot tell you whether it is fair. Ask the buyer how the price was worked out, and compare it with at least one other before you answer. Once you have the note and a payment record, send us those details and we will show you what buyers would pay and how each figure was reached. Selling or collecting on an inherited note can also have tax consequences that depend on your circumstances, so speak to a CPA before signing.
Once the papers are in hand
With the note and a payment record in front of you, work out one figure before deciding anything: the monthly payment multiplied by the payments left, which is what the note pays if you keep it to the end. Any sale price will be lower than that. Whether the difference is worth giving up depends on what the money would do for you now, and that part of the sum is yours alone to judge.
Related questions
Do I own the house if I inherit a mortgage note?
No. The payer owns the house. You own the right to their payments and a lien on the property that secures the debt. You would only end up with the property if the payer defaulted and the lien was enforced.
What if I cannot find the original note?
Look in the safe deposit box and ask the attorney or title company that handled the original sale. A missing original can sometimes be replaced by a sworn statement called a lost note affidavit. Whether a buyer accepts one, and at what price, varies, so say at the start that the original is missing.
Does the payer have to keep paying after the note holder dies?
Yes. The debt does not end with the lender's death. The payer owes the same amounts on the same dates to whoever now holds the note, which is usually the estate first and the heirs later.