Many people going through the estate process to create a living trust ask our law firm questions about what they can and cannot include. One of the most common questions we receive is, “Can I put my house in a living trust if there is still a mortgage attached?”
The answer is, yes. In fact, it is very common for people to include property in a living trust that still has a mortgage. Most people do not own their houses or property at the time they create a living trust, so it is common to see property with a mortgage added.
However, there are some important things to know if you plan on adding a property with a mortgage to your living trust:
- You must continue to pay your mortgage on the property. Adding your property to a trust does not remove your obligation to pay that mortgage. If you don’t pay, you risk having your home taken away from you.
- Home loan lenders may ask you to remove the home from the trust if you decide to refinance your home. You may be asked to remove the home from the trust until you receive the new loan, then you will be free to add it back to the trust. Your lender may not ask you to do this, but most do.
- Putting your home into a revocable living trust does not impact the ‘due on sale’ clause in a mortgage. Unlike if you sold the property to a new owner, a lender will not demand you repay the full loan as a result of adding it to the trust.