The housing market has been throwing curveballs lately. High interest rates, rising home prices, and inflation climbing back up to 3% (according to the latest consumer price index) have made it harder than ever to buy a home.
These challenges are nudging more families toward multigenerational housing.
According to a report from the National Association of Realtors®, 17% of homes bought last year housed multiple generations of family members.
This is the highest percentage since 2013! Whether elderly parents move in with grown kids or vice versa, sharing a roof is becoming a smart financial move.
But what if you went a step further? Could moving in and taking over your parents’ mortgage make homeownership easier? Let’s break it down in plain English.
How to Take Over Your Parents’ Mortgage
First off, not all mortgages are “assumable.” That means you can’t always just take over someone else’s loan.
Government-backed loans like FHA, USDA, and VA loans are assumable, but most conventional loans aren’t.
If the loan is assumable, lenders usually only allow immediate family members—like kids or siblings—to take over.
Steve Sexton, CEO of Sexton Advisory Group, says you’ll need to meet certain criteria, like having good credit and proof of income.
Do You Need to Be on the Deed?
Not at first, says finance expert Bobbi Rebell. But it’s a good idea to get your name on the deed later.
This way, you can refinance the loan or sell the house if needed.
The Steps to Assume a Mortgage
Here’s what you’ll need to do:
- Agree on the mortgage terms with your family.
- Confirm with the lender that the loan is assumable.
- Let the lender check your finances, like your credit score and income.
- Sign the paperwork and officially take responsibility for the loan.
Assuming a Mortgage vs. Sharing One
If you assume the mortgage, you take full responsibility for the loan, and your parents are off the hook.
If you share the mortgage, both of you are still liable for payments. Sharing might be a better option if you’re not ready to handle the payments solo.
The Downsides of Assuming a Mortgage
Taking over a mortgage isn’t always smooth sailing. Here are a few challenges:
- Credit Checks: You’ll need a solid credit history.
- Inherited Loan Terms: You’re stuck with the original interest rate, which might not be great.
- Refinancing Costs: If the loan isn’t assumable, you’ll need to refinance—and that means new closing costs.
For example, Cliff Ambrose from Apex Wealth shared a case where a client took over his mother’s mortgage.
Since it wasn’t officially assumable, he refinanced, which cost him more but gave the family financial stability.
Do You Have to Live in the Home?
Usually, yes especially for government-backed loans like FHA.
But if you inherit the home, you might not have to live there as long as the payments are made.
What Happens if Your Parents Pass Away?
If you inherit the house, you may be able to keep the mortgage under the Garn-St. Germain Act, which protects family transfers.
Some lenders may still require a refinance, though, so check the terms carefully.
The Bottom Line: Taking over your parents’ mortgage can be a path to homeownership, but it’s not always easy.
Make sure you understand the rules, check your finances, and be ready for potential bumps along the way.
Who knows? This could be the start of your journey to owning a home without having to start from scratch!