Can I Put My House into a Living Trust if There is a Mortgage?
Transferring mortgaged property to a trust might be complicated but not impossible.Enrolling in a living trust is a way of having your assets ownership transferred to your trust. The trust claims ownership of the assets so that it can do what you intended it to do.
One of the most significant assets people own is their home, and this is the type of asset you would want to transfer into your trust.
Why put your home in a trust?
There is one main reason: to avoid the probate process. Putting your home in a trust helps keep it out of probate and money, which can take up to a year requiring your heirs to spend most of their time in hearings.
Ordinarily, trusts require the legal title in the name of the trustees. However, if there is a mortgage on the title, the lender has an ultimate say over any legal transfer of the legal title. Most of the times they can refuse to pass the title from the mortgagor to their chosen trustees.
When you have a mortgage on your home, and you intend to place it in a trust, it is crucial that you inform your lender first. This will help ensure that the trust contains all the requirements to satisfy their standards. Failure to which you could end up triggering your note’s due-on-sale clause.
Understanding the due-on-sale clause
To protect the lender, most mortgages include the due-on-sale provision. If this clause is in your mortgage documents, the mortgage company can demand full payment when you sell your home or pass the ownership to a new owner. Since enrolling in a trust changes the ownership, the lender may use the due-on-sale clause to force you to pay the full amount of the mortgage. However, The Mattar Firm has ways to work around this.
If you have a complicated situation or are uncomfortable trusting your knowledge, it is advisable to consider hiring a professional estate-planning lawyer to ensure this act applies to your transfer.
Getting professional help
If you are looking to put your house in a trust, we at The Mattar Firm are always ready to assist you where we can. The Mattar Firm is dedicated to protecting your family, wealth, future, and personal legacy even when you will not be there. We care for all our clients and look forward to providing lasting solutions. Contact one of our estate planning lawyers at The Mattar Firm today to get started.