Refinancing a Home in a Trust: What You Need to Know

Introduction:

Is it possible to refinance a home that is put into a trust? The answer is largely dependent on the type of trust and the lender's policies. This article aims to clarify the nuances of refinancing a home in different types of trusts, providing guidance for homeowners looking to refinance their property.

Can a House in a Revocable Living Trust Be Refinanced?

Yes, and it is strongly encouraged.

The main reason for establishing a revocable living trust is to simplify the transfer of titled assets and to avoid probate. By doing so, you ensure that the successor trustee can easily manage the assets upon your passing. Refinancing a home that is in a revocable living trust is also quite straightforward. Here are some key points to consider:

Automatic Process: The process of refinancing a home in a revocable living trust is generally seamless. The title is temporarily transferred to an individual’s name to facilitate the refinancing process, ensuring that the property returns to the trust afterward. Ease of Transfer: Since the trust is revocable, the transfer of the property is simple and straightforward, making the refinancing procedure painless. No Probate: The trust bypasses probate, significantly reducing the hassle and potential costs involved in the estate administration process.

Refinancing a Home Deeded to an Irrevocable Trust

It might not be straightforward, but it’s possible.

When a property is deeded to an irrevocable trust, the process can be more complicated. Here’s what you should know:

Checking with the Lender: The first step is to inquire with your existing mortgage lender. If they refuse to refinance, consider reaching out to a mortgage broker who may represent a lender willing to work with an irrevocable trust. Temporary Transfer: To facilitate the refinancing process, the property may need to be temporarily transferred out of the trust into an individual’s name, then returned afterward. Additional Documentation: The temporary transfer and return of the property to the trust might require additional documentation, which could increase the complexity of the process. Consult Financial Advisors: Consulting with legal and financial advisors can help navigate the complexities involved in refinancing a property in an irrevocable trust.

Other Types of Trusts and Refinancing

Financing or Refinancing a Home in a Typical Living Trust Is Quite Easy.

For a typical living trust, refinancing is a routine process that can be handled with ease. Here are some considerations:

Lender and Title Company: The lender and title company typically ask for details about the trust. If these details are provided, the process of refinancing becomes smoother. Loan Availability: Many lenders are willing to work with living trusts, making the refinancing process relatively straightforward. Documentation and Paperwork: It’s important to ensure that all necessary documentation is in place to facilitate the refinancing process.

Conclusion:

Whether you are dealing with a revocable living trust or an irrevocable trust, the process of refinancing your home is not as daunting as it might seem. The key lies in understanding the type of trust involved and working with the right professionals. By doing so, you can ensure a smoother and more efficient refinancing process.