Can A Lender Close a Mortgage
On A House Owned Within A Trust?
This is a question I am asked often. The answer is: “It depends upon the type of mortgage!”
There are many reasons why Estate-Planning Attorneys might recommend placing a property within a Trust. This has been known to cause issues for borrowers after the fact, as borrowers don’t often foresee the future need for a mortgage when they are doing estate planning.
Conventional mortgage financing allows for borrowers to close a mortgage when the house is owned by a Revocable Trust. Of course, there are prerequisites that must be met in order for this to take place. However, these requirements are not onerous (overly burdensome).
With rare exceptions from a select few nontraditional lenders, lenders will NOT allow a mortgage to close on a property owned by an Irrevocable Trust.
However, Reverse Mortgages are the exception to this rule! Many Reverse Mortgage Lenders WILL close a mortgage on a house that is owned within a Revocable or Irrevocable Trust!
You should note that before ANY lender will entertain closing within a Trust, the Trust documents must be reviewed and approved by the lender’s counsel.
As a mortgage professional who works closely with many Estate-Planning and Elder-Care Attorneys, I recommend to these attorneys that before they place a property into a trust, they ask questions of their clients to determine whether there will be a future need for a mortgage. It might just be prudent to place mortgage financing on the property now, before the house is transferred.
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, The Daily News, Anton Press, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.