Several times in the last year, we’ve had a lot of clients asking about refinancing a property that is held in Trust. Although mortgage rates have increased from where they were a year ago, rates are still near historic lows and some borrowers may be able to save money by refinancing their mortgage. If you have an estate plan that includes a trust, it also probably includes a special warranty deed that transferred your property to your trust. You may be wondering if you can refinance your mortgage on property that is owned by your trust.
Real estate held in a revocable trust often can be refinanced. If the trust gives the trustee the power to mortgage the property, the trustee may be able to sign for the loan. However, a lender may not be willing to refinance the property held in trust. If this is the case, the lender may require that the property be taken out of the trust before refinancing. They may have you sign a new deed transferring property from your Trust back to yourself.
But now comes the important part to ensure your trust is protecting the assets and avoid probate. If you refinance be sure to review the deed prepared and recorded during that transaction. If your home is no longer owned by the Trust after the transaction, it is important to contact an attorney who can prepare another Special Warranty Deed transferring it back to your Trust. If this is not done and you pass away, your property will end up in probate, which is what you were trying to avoid when creating the Trust in the first place. If you have any doubt at all, how the property was transferred after your refinance closed, an attorney can review to be sure it is still owned by the trust and if not assist you in preparing the deed to transfer title back to the Trust and avoid probate of your property upon your death.