A very common estate planning practice is to draft a trust and title your real estate in the name of the trust. This practice lets the trust “own” your real estate holdings. There are many positive reasons why one would do this. However, if the property owned by the trust has a mortgage with it and you would want to refinance the mortgage it might be confusing. Refinancing real estate that is held in a trust involves a few extra steps compared to refinancing a home owned outright by an individual. Lenders will usually not refinance unless the property comes out of the trust.
There are a couple of different types of trusts that can hold real estate. You will want to confirm and understand the type of trust your home is in. The two most common are revocable and irrevocable trust. A few lenders will allow refinancing for a home in a revocable living trust. However, if this is not the case and you found a better rate with a lender who won’t process the refinance with the property in the trust, here is the typical process to get this transaction completed.
The easiest and cheapest thing that I would do for my clients is draft a quit claim deed transferring the property out of the trust’s name back into my client’s name individually. The client can take this deed back to the lender and continue the refinance process as normal. The lender will record the deed as part of the refinance transaction. Once all of that has transpired and the new mortgage recorded, I will then draft a quit claim deed transferring the property back into the trust.
This might seem like a headache, but for the small cost for drafting the deeds and recording fees versus the benefits of a lower interest rate for many years as you pay off the mortgage, it always makes financial sense. Any type of situation where you need a real estate deed drafted, please contact us. We will be glad to help.