Home Refinance Issues

A common concern or question that people have with regards to real estate is, how do I refinance or how do I handle mortgage especially when I have a trust?

Atty. Chris Berry discusses this in this episode of Daily Wisdom.


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Episode Transcript

Refinancing At Home

Hi, this is Chris Berry with Castle Wealth Group, and today we’re going to talk about issues in refinancing at home, especially if you have a trust. And if you like this information, please make sure to subscribe so that you get updated when we have new videos.

Christopher Berry is a leading estate attorney and advisor in the area of retirement and legacy planning. He has been featured in publications such as Forbes, Kiplinger’s, Crain’s Detroit and more. He’s the host of the weekly radio show and podcast, The Chris Berry Show. He’s a national thought leader as it relates to retirement and legacy planning and has authored the Amazon best selling book, The Caregiver’s Legal Guide.

So a common concern or question is people have with regards to real estate is, how do I refinance or how do I handle mortgages, especially when I have a trust? And we need to talk about the different ways that you could own real estate. One way would be the house is in your name and maybe you have what we call a lady bird deed, which is a type of deed to say the home is in your name while you’re live, and then upon death, it avoids probate and goes to whoever you listed as a beneficiary on that deed, which could be a trust. And a lot of times when we’re doing revocable living trusts, that’s what we do is a lady bird deed. Now, if you were to refinance or if you have a mortgage on this type of real estate, a lady bird deed, really it’s pretty straightforward they just refinance it and your name. There’s nothing really that needs to be done.

Now, the second situation is what if we have a revocable living trust as the owner of the piece of real estate? In our office we don’t do this very often because there’s hardly a good reason to name a revocable living trust as an owner of a piece of real estate. But typically what happens, to make it easy if you were to do a refinance or want to secure a mortgage, most title companies don’t really like the idea of lending to a trust. And so we would deed it out of the trust, do the refinance, do the mortgage, and then deed it into the trust after that refinancing is done. Or if you’re buying a new piece of property, you would buy it in your name, secure the mortgage, and then you could move it into the revocable living trust.


Due on Sale Clause

That would not trigger what’s called a due on sale clause because of the St. Germain act of 1982, that says if you have a beneficiary interest in the trust, they can’t trigger the due on sale clause. But title companies are hesitant typically to lend directly to a trust so that’s why we would deed it out of the trust, put it into your name if you’re refinancing, and then deed it to the trust without triggering the due on sale clause.

Now, the third issue or situation is if we have an asset protection trust owning the trust like a castle trust. First, if we’re refinancing, understand again, a lot of mortgage companies or banks, financial institutions, they don’t like to lend directly to a trust because they’re concerned whether they can make a claim on that because with a mortgage or a refi, it’s a secure transaction, you’re securing it based on the real estate. And so sometimes, especially unsophisticated mortgage companies or a lot of these kind of high volume places, they don’t want to even deal with it. So even though legally they can, their policy is to say, I don’t want to lend to a trust.

Now, if you already have an existing mortgage on a property and it’s in your name, we can move it into a castle trust, into an asset protection trust because technically it’s what’s called a grant or a trust. So we still can rely on the St. Germain act of 1982, that allows us to move a house that has a mortgage into that castle trust asset protection trust without it triggering that due on sale clause. So that’s not an issue. The only real issue happens when we get in a situation where it’s in an asset protection trust, and we don’t want to move it out because that would restart that five-year clock for long-term care cost. And so then if we absolutely have to do a refi or looking at a home equity loan, there are some mortgage companies out there, and we have some contacts that have lent to these types of trusts in the past.


Real Estate and Trusts

Likewise, even companies, not to throw them out there, but Chase has lent to castle trust in the past, but it’s just a matter of working or finding the right lender to do it. So, ideally we don’t want to go that route, especially if it is already in an asset protection trust, but worst case scenario, we could always take it out of the trust, refinance and put it back in.

So hopefully that’s helpful, helped you understand the different ways that we work with real estate and trusts in terms of mortgages and refinance. Big picture, typically it’s not an issue, especially if you’re looking to purchase another house or you already have a mortgage on a house and you want to move it into the trust, not a big deal because we have the St. Germain act. Or if you have a Ladybird deed, not a big deal. Only where it becomes a little bit troublesome is that if it’s already an asset protection trust and you want to or have to refi, we have to A, either find a lender that will do so or B, take it out of the trust, do the refinance, and then put it back in the trust. So hopefully this is helpful. This has been Chris Berry with Castle wealth Group.

Castle Wealth Group has clients across the nation and helps them raise, plan, protect and preserve what is important by creating a retirement and legacy blueprint.



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