Inheriting a house can sound like winning the lottery. Then the paperwork settles and a quieter truth emerges: if you cannot afford to hold it while the estate winds its way through probate, an inherited property can feel less like a windfall and more like a millstone.
The rates notice still arrives. The insurer still wants its premium. If there is a mortgage, the bank still expects to be paid. And all of this lands while the place sits empty and the estate is often months away from settling. So before you fall in love with the idea of keeping it, or panic and rush a sale, here is a clear look at what an inherited property really costs to hold, and your options for managing it.
Why an inherited property costs you before it pays you
Here is the catch that blindsides people. Until probate is granted, the estate’s money is locked up, so you cannot simply dip into the deceased’s funds to cover the bills on the house. The ATO notes that winding up an estate commonly takes six to twelve months, and the house does not put its running costs on hold while you wait.
That means the holding costs either come out of your own pocket, to be reimbursed later, or they pile up against the estate. Either way, an inherited property you cannot comfortably carry can turn into a real source of financial stress in the months before it is sold or transferred.
The 5 costs of holding an inherited property
Every house is different, but these are the costs that catch new owners of an inherited property off guard.
1. The mortgage
A mortgage does not die with the owner. If the house still has a loan against it, the repayments must keep being met, or the lender can eventually step in. More on your options for that below, but for now, assume the bank still expects to be paid every month.
2. Council rates and water
Rates and water charges keep accruing regardless of whether anyone is living there. Left unpaid, they become a debt against the property that has to be cleared before or at sale.
3. Insurance
Keeping the house insured is one of the most important things to stay on top of, and if there is a mortgage the lender will usually require it anyway. But here is the sting: an empty home can quietly fall outside your cover. We will dig into that trap in a moment, because it is the one that catches the most people.
4. Utilities and maintenance
Electricity, gas, lawns, gutters and the odd repair all keep ticking over. A house left to its own devices deteriorates, and a neglected one is harder to sell. Basic upkeep is not optional if you want to protect the asset’s value.
5. Strata or body corporate fees
If the inherited property is an apartment or townhouse, strata levies keep coming, and special levies for building works can land without warning. These are payable whether the place is occupied or not.
The insurance trap nobody warns you about
This is the big one, because getting it wrong can be catastrophic. Most home insurers treat a property as unoccupied once it has been vacant for a set period, commonly around 60 consecutive days, though it varies between insurers. Once a home crosses that line, your policy can change in ways you will not notice until you try to claim.
Typically an extra unoccupied excess applies, some cover is restricted, and crucially, if you have not told your insurer the home is empty, a claim can be reduced or knocked back altogether. An inherited property sitting empty through a months-long probate is exactly the scenario this catches. The fix is simple: tell the insurer the situation, ask what their unoccupied rules are, and keep the cover current. Moneysmart’s guide to choosing home insurance is a good neutral starting point.
What happens to the mortgage on an inherited property?
A common myth is that a mortgage is wiped when the borrower dies. It is not. The debt stays attached to the inherited property, and someone has to keep servicing it. You generally have three paths: the estate covers the repayments until the house is sold or transferred, you take over the loan and refinance it into your own name if you want to keep the place, or the property is sold and the mortgage is cleared from the proceeds. Which one suits depends on whether you want to keep the house and whether you can afford to.
Your first practical steps with an inherited property
Before you agonise over keeping or selling, a few early moves protect both you and the inherited property while the estate is sorted.
- Secure the home and notify the insurer that it is now empty, so your cover stays valid.
- Check whether there is a mortgage and confirm who is keeping the repayments up to date.
- Get the property valued, both for the estate’s records and so you know what you are dealing with.
- Keep every receipt for rates, insurance and upkeep, so the estate can reimburse you.
- Do not rush a sale or a decision while emotions are raw and probate is still in train.
None of this commits you to keeping the inherited property. It simply buys you time to make a clear-headed choice rather than a panicked one.
Keep, sell or rent? Weighing your three options
Once you understand the costs, the decision usually comes down to three choices.
Keep it
If you want to live in the house or hold it long term, and you can genuinely afford the mortgage and running costs, keeping it can be a wonderful outcome. Just be honest about the ongoing numbers, not only the sentimental pull.
Sell it
If you cannot comfortably carry it, selling is often the cleanest path. It clears any mortgage, stops the holding costs, and turns the asset into cash you can split or use. Keep an eye on the tax timing, which we cover next.
Rent it out
Renting can cover the holding costs and even turn a profit, but it changes the picture. The house becomes an investment property, which carries its own tax consequences, landlord obligations and a different insurance setup. It is a commitment, not a set-and-forget.
Mind the tax timing if you sell
There is a valuable concession worth knowing. According to the ATO, an inherited property is generally exempt from capital gains tax if you sell it within two years of the person’s death, provided it was the deceased’s main residence and was not being used to earn income. Sell within that window and you can often avoid CGT entirely. Sell later, or rent it out in the meantime, and a capital gains tax bill can apply on the increase in value. It is worth getting tax advice before you decide, because the timing can make a real difference to what you keep.
Covering the costs while you decide
If you are caught between an inherited property you cannot easily fund and an estate that is months from settling, you have options for bridging the gap. As an accredited finance broker, Get A Loan compares options across our panel of more than 70 lenders, and our service is free for you.
If you are a beneficiary, an inheritance advance can bring forward part of your inheritance to cover the holding costs, or even to buy out other beneficiaries if you want to keep the house, repaid from the estate when it settles. Alternatively, an emergency loan or an unsecured personal loan can tide you over. Whatever you choose, taking on debt to hold a property is a decision to make with a clear head and a calculator, so it is worth reading our warning about borrowing first.
Holding an inherited property: the quick checklist
- The estate is frozen until probate, so holding costs often fall to you first.
- A mortgage does not disappear on death and must keep being serviced.
- Rates, insurance, utilities, maintenance and strata all keep accruing.
- Tell your insurer if the home is empty, or you risk a denied claim.
- Selling within two years of the death can avoid capital gains tax.
- Decide honestly between keeping, selling and renting based on the real numbers.
What if it all feels like too much?
Inheriting a house you cannot afford to keep is more common than people admit, and there is no shame in letting it go. Sentiment is powerful, especially when it is the family home, but a property you cannot fund will only cause stress. If you are weighed down by the costs, a quick chat with a financial counsellor through the National Debt Helpline on 1800 007 007 is free and can help you see the path clearly. Selling is not failing. Sometimes it is the kindest thing you can do for yourself.
Final Thoughts
An inherited property is a genuine gift, but only if it fits your life and your budget. Know what it costs to hold, protect the insurance, keep the mortgage serviced, and weigh keeping against selling or renting with clear eyes rather than pure emotion. Handle it methodically, lean on advice where the numbers or the tax get tricky, and you will make the most of what you have been left without it becoming a burden.
Disclaimer
The information in this article is general in nature and does not take into account your objectives, financial situation or needs. It is not personal advice, tax advice, legal advice or a recommendation to apply for any product. Before acting on any information, you should consider whether it is appropriate for your circumstances and seek independent financial, legal and tax advice where appropriate.
Get A Loan Finance Pty Ltd is not a lender. We are an accredited finance broker and work with a panel of lenders and finance providers. Product features, eligibility criteria and availability can change without notice, and all finance is subject to lender approval.
