Can You Put a Home that Has a Mortgage in a Family Trust?


Keeping your most precious asset out of the probate court system, which may take up to a year and compel your heirs to spend their vacation days attending hearings, is one of the primary benefits of putting your house into a trust. When you have a mortgage on the property that you want to put into a trust, it is imperative that you first tell your lender so that they can verify that your trust has all of the essential components that are required to fulfil their requirements. If you don’t pay attention to this detail, you can find yourself activating the due-on-sale provision of your note.


A house that still has a mortgage may, in fact, be transferred into a family trust. However, the first and most important step is to get in touch with your lender to find out what restrictions they have.

Understanding Due-on-Sale

If you remove your name from the property deed and put the name of a trust in its stead, you will no longer be considered the legitimate owner of the property. This presents a challenge for mortgage firms since the borrower who is responsible for making the repayments no longer has a financial stake in the property. It is possible for a lender to trigger the due-on-sale provision if there is a change in title to the property that occurred without the lender’s prior written approval.

Exceptions to the Rule

It is standard practise for a person to put their spouse onto the deed of their home at a later period after they have already qualified for a mortgage as a solitary and independent individual. This is only one of the exemptions that the Garn-St. Germain Act of 1992 allows for under certain circumstances. Another arrangement under which lenders are required to accept the transfer of title without invoking a due-on-sale clause is known as an inter vivo, also known as a living trust. Having said that, the circumstance has certain needs to fulfil in order to be permissible under the statute.

Follow Up on Mandatory Requirements

The borrower who is named on the mortgage must be the principal beneficiary of the living trust in order for the borrower to be eligible under the Garn-St. Germain Act. Some lending institutions want that every beneficiary of the trust also sign on as a guarantor for the loan. Before transferring the title into the trust, one of the reasons why it is important to get in touch with your mortgage company and make sure you are in compliance with all of their laws is because of this.

You won’t be allowed to rent out your property, despite the fact that doing so could seem to be a smart financial move, particularly in high-priced locations such as San Francisco, where the average rent brings in around $3,700 per month. If a borrower wants to transfer ownership of their house into a living trust, they are required under FDIC rules and the Garn-St. Germain Act to continue living in the property. If you want to sell the property or transfer the title in any other way, you are required to communicate with the lender in order to make arrangements for a method that will inform them in a timely manner.