It can be difficult to receive an inheritance. The loss of a loved person can be one the most difficult events in life. However, inheritances are a blessing.
It can be hard to think about inheritance funds during stressful times.
How does inheritance work?
When a person dies, their assets – or what is legally coined as estate – are often left to their loved ones in the form of a will. The will is a legal document outlining a person’s wishes after they die, which can include who will inherit their estate, how the estate will be distributed, and if there are restrictions on how the inheritance can be used. A will is often executed by an executor.
In the absence a will, it is the responsibility of the state or territory government to decide how the estate is managed and how it is distributed among family members. If the executor is unavailable, the court may appoint an administrator who will execute the will. The deceased’s debts and taxes may also be paid out before the estate is distributed.
Although the entire process of inheritance can be lengthy, once the money has been transferred to your account, you have access to it for any purpose.
Is it possible for you to obtain a loan on your home with inheritance money?
People who inherit money may be subject to strict regulations by banks and financial institutions if they want to borrow money for their homes. These are the documents that you will need to prove.
1. The inheritance is non-refundable
You must first prove that you own the money. A letter from your executor must be submitted confirming details of inheritance. The letter should include the amount received and the date. You may be asked by the executor to send a copy and grant probate. This will prove that your will is properly registered. This document can be secured by a solicitor.
2. The inheritance money has been transferred to your bank account
You will also need to provide bank statements that prove your inheritance was deposited into your account. If your inheritance is held in the name of the executor or trustee of the deceased’s estate, you should provide a letter stating that you can legally access the funds. The amount and date specified in the bank statement should match those in the executor’s letter.
3. Three months must have passed since your last possession of the inheritance
Some lenders require that the inheritance be kept in your bank account for no less than three months before you are eligible to receive a loan.
How much can you borrow?
Just like traditional loan applicants, you can borrow up to 95% the property’s value, but you may be required to pay for lenders mortgage insurance. You can avoid this cost by paying at least 20%.
Many lenders will allow borrowers who are the beneficiaries of a substantial inheritance or a huge monetary gift to deposit the money. Deposits made from real savings are not accepted by all lenders. This means you must have saved the money.
In addition to government-sponsored benefits like the First Home Owners Grant or First Home Loan Deposit Scheme, you can also use your inheritance money.
However, you will still have to meet other requirements like job security and steady income.
Based on your income and expenses, our borrowing power calculator will provide you with an estimate of how much money you can borrow.