Inheriting a House with No Mortgage

The good news — and the decisions ahead

Inheriting a house with no mortgage means you're receiving a debt-free asset. But "mortgage-free" doesn't mean "cost-free." You'll face ongoing expenses, tax considerations, and important decisions.

Immediate costs to plan for

Property taxes continue regardless of ownership. Homestead exemptions or senior freezes typically end upon death. Insurance must be arranged quickly — the deceased's policy may be cancelled. Maintenance and utilities cost money every month the home sits in probate.

Your three main options

Move in. Transfer the title, update insurance, transfer utilities, and potentially file for a homestead exemption.

Rent it out. Generates income but requires title transfer, landlord insurance, and property management. Rental income is taxable.

Sell it. Gives you a lump sum and eliminates ongoing costs. The stepped-up basis means you'll likely owe little or no capital gains tax if you sell soon after inheriting.

The stepped-up basis advantage

Your tax basis resets to the home's fair market value on the date of death. If the home is worth $400,000 when you inherit it and you sell for $410,000, you only pay capital gains tax on the $10,000 difference. See our inheritance tax guide for more.