Inherited a Home but Can’t Afford the Mortgage? 5 Strategies to Avoid Selling

Inheriting a home is a bittersweet milestone—one that carries both emotional weight and financial complexity. For many, the burden of an inherited mortgage can feel insurmountable, especially on a modest income like $36,000 annually. But selling isn’t your only option. By leveraging creative financial strategies, you can retain ownership of the property while addressing the mortgage strain. Here’s how to navigate this challenge without compromising your financial stability.

1. Assess the Mortgage Balance and Home Value

Before making any decisions, you need clarity on two critical numbers: your remaining mortgage balance and your home’s current market value.
- Mortgage Balance: Use tools like Chase’s MyHome® dashboard or a mortgage balance calculator to determine how much principal remains. For example, if your original loan was $320,000 with a 7.25% rate, after 60 months, you’d still owe approximately $302,012 (per the calculator’s formula).
- Home Value: Check online estimators like Chase’s Home Value Estimator or consult a real estate agent for a CMA (Comparative Market Analysis). Factors like location, square footage, and local demand will influence the value.

Once you have these figures, you can evaluate whether the property’s equity (value minus mortgage balance) justifies alternative solutions.

2. Rent Out the Property

If the mortgage payment exceeds what you can afford personally, consider renting the home. This turns a liability into an asset:
- Cash Flow: Calculate if rental income can cover the mortgage, taxes, and maintenance. For example, in areas with a 5% average rental yield, a $400,000 home could generate $2,083/month in rent—potentially exceeding the mortgage payment.
- Tax Benefits: Property expenses (repairs, insurance, property taxes) are often deductible, reducing your taxable income.
- Equity Growth: Over time, renters’ payments chip away at the mortgage principal, building equity even if you’re not living there.

3. Refinance to Lower Payments

If the home’s value exceeds the remaining mortgage balance, a refinancing could reduce monthly costs:
- Lower Rates: Current average 30-year fixed rates are around 6.5% (as of 2024), but refinancing to a shorter term (e.g., 15 years) or an adjustable-rate mortgage (ARM) might lower payments.
- Cash-Out Option: If equity is substantial, you could tap into it for debt consolidation or emergency funds.

4. Lease-to-Own Agreement

Partner with a buyer who wants to purchase the home eventually but can’t secure financing immediately. A lease-to-own contract allows them to rent now and buy later, with rent credits toward the down payment. This reduces your cash outflow while keeping the door open for a future sale.

5. Seek a Reverse Mortgage (If Eligible)

If you’re over 62, a reverse mortgage could provide tax-free payments while keeping the home in your name. However, this is only advisable if you plan to stay in the property long-term, as it requires repayment when you move out or pass away.

Conclusion: Selling Isn’t Your Only Option

By strategically combining these approaches, you can retain the home while managing financial strain. For instance, a $36,000 salary might struggle to cover a $2,500 mortgage, but renting the home for $2,000/month could reduce your net cost to $500/month (after expenses). Over five years, this approach could build $100,000 in equity while preserving your inheritance.

The key is to act methodically: assess your numbers, explore income streams, and prioritize long-term equity growth. Selling the property should be a last resort—one that’s only considered after exhausting these alternatives.

Inheritance is a gift of both memory and opportunity. With careful planning, you can honor your grandma’s legacy without financial sacrifice.