Do you own a property that’s included in a trust? Are you wondering if you can refinance this property? Yes, you can.
First, a trust is a legal document set up by someone who’s wants to protect their assets, including homes and other real estate, from probate court. The trust names the trustee who makes decisions concerning the trust and outlines the legal responsibilities of that person. Prior to making any decisions concerning your trust and personal assets, you should talk with your attorney and financial advisor for guidance.
After speaking with your attorney and financial advisor, if you still want to refinance your property held in your trust, the trustee will need to follow the guidelines set forth by the mortgage company. (Note: Some lenders may not extend loans to trust properties.)
You’ll need to notify the lender that the property is included in a trust and provide them with a copy of the trust. (Note: Even if you don’t notify them, they’ll still discover the home is legally owned by your trust once they perform the title search.)
Additionally, you’ll need to determine if the trust gives the trustee the power to take out a mortgage on the property; and, if the trust allows the property to be used as collateral or security for the loan.
- If it does, the trustee will need to sign a promissory note. The trust will be liable for repayment of the loan; and the property being refinanced will be used as collateral.
- If it doesn’t, the trustee cannot sign the mortgage. However, if the property can be used as collateral, the lender may require you to re-title the property first, which means the property will need to be taken out of the trust and returned to your personal ownership before you can obtain a new loan. You can ask your lender if they’ll complete the deed paperwork for you (for free or a fee). If they won’t, you’ll need to ask your attorney to do this for you. Actually, two deeds will need to be prepared and recorded with your county registrar or recorder. The first deed takes your property out of the trust; and the second one puts it back into the trust. Make sure the second deed is recorded immediately after your refinance is completed. Additionally, you may need to have your attorney draw up a warranty stating that the property can be used as collateral on the new loan.
If you’re looking to refinance a property held in a trust, contact the mortgage specialists at Grandview Lending. We can review your trust documents with you to determine what needs to be done to accomplish your refinance; and we’ll work with you throughout the loan process.
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