My father has passed away and I want to buy his home. There is no mortgage left and I will be paying off my sister half of the house value. Do I need to get a new mortgage?
Of course you don't need to take a mortgage - if you happen to have enough cash (or other assets) to pay your sister her share, or if she is willing to take it in installments over the next years.
Mortgages are not needed to buy houses, but to pay for them - subtle difference. If you can pay - in whichever agreed way - without a mortgage, you won't need one.
Owing money to family members can create serious problems. Taking out a purchase-money mortgage to pay your sister for her share is the best way to avoid future friction and, possibly, outright alienation.
does your sister agree to sell her share of the house? Will you live in the house or rent it out? In Australia if you rent out the house you can claim on expenses such as interest deductions, advertising cost, advertising to get tenants in, maintenance cost, water & sewerage supply charge, Land tax, stamp duty, council rates. A percentage of these expenses can be used to reduce your gross income and therefore reduces your tax liability (called negative gearing). Not sure how other countries handle investment properties. If you plan to live in the house and not rent it out and you have spare cash to buy outright then do so. You don't want to be in debt to the bank
This answer assumes (based partly on your commants and some simplifying assumptions)
- You would like to live in the property
- Your sister has no immediate use for the property but would like to "keep it in the family"
- Any inheritance tax can be covered with cash/other assets so is not an issue here.
- You don't have the cash on-hand to buy your sister out immediately.
As I see it you have a few options.
Get a mortgage to buy your sister out. This avoids any ongoing involvement of your sister which may or may not be a good thing. It means you will be paying interest to a bank (or similar financial institution).
Make an arrangement to buy the house in installments, possiblly in combination with some kind of rent. Likely to be a complex option to set up.
Buy the house using a loan from your sister. potentially agree a "private mortgage" to protect your sister in the event you fail to pay. If interest is paid then it is likely to attract tax.
Simply pay your sister rent, let her keep ownership of her half of the house either forever or until you have saved up the cash to buy her out. Rent is likely to attract tax.
Whatever option you go with I would reccomend you get proffesional advice on any local legal/tax issues and drawing up the contracts.
If you do go into an arrangement that keeps your sister involved make sure you discuss the what-ifs upfront and build them into your agreement. If you can't/won't pay what happens? can she insist that the house is sold and the proceeds split in some way? can she rent our her half of the house to someone else?
Making a mortgage is NEVER a good idea. Unless you REALLY need it try to avoid dealing with banks at any price!! If you have the money, just pay for it, if you don't, you can always get to a deal with your siblings to pay it by installments but always avoid mortgages or you may end in troubles.