Can You Refinance a Home That’s in a Living Trust?

I’ve been asked several times if placing a home or other real estate into a Living Trust will prevent the owner from refinancing the property. The answer is: No! However, when it’s time to do your re-fi, you’ll want to make sure to keep the bank happy. Generally speaking, the bigger the bank, the more they will want to be kept happy.

When you apply for a new loan, the bank will do a title search on your home, and that is when they’ll discover that your home is legally owned by your trust. If they care about that (and some banks do), then the bank will tell you to take the house out of the trust first, and then do the new loan. The first thing to ask the bank is whether they will do that extra paperwork for you. If they want your business, they should charge little or nothing to transfer the property out of the trust. But if the bank will not do this, then you will need to ask your estate planning attorney to do it for you. (In my firm, our LegacyPlan members would not be charged for these additional services.)

Actually, you will need to ask for two deeds (and the related paperwork) to be prepared and recorded. The first deed will take your property out of trust. The second deed puts it back. You must make sure that the second deed gets recorded immediately after the re-fi has been completed.

Unless you’re on the LegacyPlan, or you have a good bank, expect to pay between $150 and $300 for the drafting of each deed, plus the related paperwork, logistics, and the recording fees.

About Paul D. Hunt

If you're a resident of California, and a homeowner, then you should clearly put your home into a living trust. A living trust makes probate unnecessary. (We don't like to say "avoiding probate," because that's misleading!) Probate is very expensive – an average home in Alameda will require a probate fee of about $37,000. Also, probate is very slow, and it's done in public. Our law office is dedicated to getting rid of all of the estate planning myths out there, like the "avoiding probate" myth. We want every family in Alameda to enjoy the many benefits of a trouble-free estate. Come to one of our seminars, or call for a free initial appointment at (510) 523- 2100.
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