transfering property out of trust to refinance

[rougerage16]

What is the name of your state (only U.S. law)? California

I want to refinance the mortgage on the house I am currently living in.
The house in a trust my mother left us and I am named the beneficiary along with my sister. I would like to refinance for two reasons, one the rates are low and two I want the mortgage in my name so I can get the tax write off.

My question is, What is the easiest way to transfer the property to do this? It seems I will have to have to take it out of the trust into my name, refinance it, then transfer it back into the trust. What kind of deed do I use to do this? Do I use a quitclaim deed?

The trust allows the trustee (a family friend) to transfer property as she seems fit.

Thanks so much!!

 

[seniorjudge]

You need to do it however the bank and title company tell you to do it.

 

[curb1]

Why not take the house out of the trust, and leave it out? Why put it back in the trust? When are the assets in the trust to be distributed?

 

[tranquility]

While you can make a distribution of the property if the trust document allows (See an attorney to prepare the deed and to check.), you will not be able to transfer it back into the trust if there is a due on sale clause in the mortgage--nor would it be a good idea.

By federal statute, a mortgage cannot be called when a property is transferred in to a wholly-owned revocable trust. However, that is no longer what you have. On the death of mother (The only way you'd be able to get a loan on the property is if it is yours. It's not yours until mom dies.), the trust became irrevocable. The federal statute would not protect your re-transfer back into the trust. Besides, even if it did, YOU would personally be liable for the loan, but would not be the owner of the property. Look to the numerous quit claim error posts (Where a person quit claims the house without refinancing the mortgage out of their name.) when people who were living together break up.

 

[seniorjudge]

Tranq, I agree with everything you say, but banks do this kind of thing all the time.

Scares me but they're the ones with the money.

 

[CrumpetHolyLaw]

Welcome to FreeAdvice!

You may be able to liquidize these assets, but this is sheer friend-friend advice. I'm not guaranteeing the bank would allow you to do this.

 

[Proserpina]

Welcome to FreeAdvice!

You may be able to liquidize these assets, but this is sheer friend-friend advice. I'm not guaranteeing the bank would allow you to do this.

Did I miss the memo announcing that you're the FA Welcoming Committee?

 

[tranquility]

Tranq, I agree with everything you say, but banks do this kind of thing all the time.

This is a new age SJ. I have a client who wanted to refinance his personal residence. It was worth $1 million and in a super-duper-bargain sale there is no way it would go for less than $800k. He wanted to refi the loan which was $90k. He had very good credit and, while he was a sole proprietor, had decades of profitability. The only reason to refi was to lower the interest rate and save some money. The house was in his living trust.

The loan took over a month to arrange! Back and forths with new demands and requests and communications with the "home office". The guy had enough cash in the bank where the loan was being sought to pay the entire amount three times. (1/2 in an IRA and 1/2 in the business operating account.) With more assets to back that up.

The house could burn down, creating a toxic waste problem that would take $400K to clean up and the bank would *still* have only a 25% debt to equity if the house appraised at the $800K.

The banks are scared and don't really know how to act in this new era of regulations. Interest is low and the government subsidies may end leaving the note holders with 30 years of low interest debt in what could be a high-inflation economy. (Although lots of people are talking deflation now.) The foreclosure complication of a different entity owning the property from the one who got the debt is a thing which will cost money to resolve. Maybe not a lot, but some. The cuts into the profit and makes the risk/reward calculation even worse.

The banks don't want the property, but, they don't want to hold a non-recourse dog note either.

 

[anteater]

Did I miss the memo announcing that you're the FA Welcoming Committee?

I liquidized some of my assets once. They sure went down smooth.

 

[rougerage16]

You need to do it however the bank and title company tell you to do it.

That's what I wanted to do but I am getting the run around from the bank and they wont give me straight answer and told me to talk to a lawyer...but I thought about it and I realized that's BS because as a bank you should be able to tell me what you will and will not authorize, ya know?

I am not willing to liquidate the house. Its the house my sister and I grew up in, live in the Bay Area and it was purchased before the housing bubble. If I sell the house now I wont be able to own a home in this area.

I did not realize that I would not be able to put it back into the trust. I wanted to because the disbursement date is when we turn 25 however I am currently 23 and my sister is 19. If we transfer it out and decide to put both of our names on the deed then we would both have to have the mortgage or can i still have just my name on it? My fear is having her on the refi paperwork will make it harder to get a loan since she is in college and has no income and student loans.

 

[tranquility]

You must think of the "trust" as an entirely separate person with credit on their own. Separate, Person.