Home with a Loan in your Trust

11 Apr 2023 · 1 min

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The speaker explains that a mortgaged home can be placed into a trust despite the presence of a loan. Federal law prevents a lender from invoking a due‑on‑sale clause solely because the property is transferred to a trust, provided certain conditions are met. Placing a home into a revocable trust is generally straightforward, though refinancing may require temporarily removing the property from the trust, refinancing, and then re‑adding it. The main complications arise with irrevocable trusts; however, a mortgaged home can still be placed in an irrevocable trust if the owner retains the right to live in the home and remains a beneficiary, which the right to live automatically confers.

Chapters

Even if you have a mortgage on your home, you can still place it in a trust. There is federal law that says a bank cannot enforce a due-on-sale clause just because you put your home in a trust, as long as certain requirements are met. There is typically not an issue when you're trying to put your home into a revocable trust. Although if at some point you want to refinance the home, you may have to take it out of the trust, refinance it, and then put it back in the trust. If there's going to be a problem, it's typically when you're putting a home into an irrevocable trust. Nevertheless, you can still put a mortgaged home into an irrevocable trust as long as you retain the right to live there and you are a beneficiary of the trust. And retaining the right to live there makes you a beneficiary.