Can You Borrow Against a Home in a Revocable Trust?

 In Revocable Trusts

Question:

My home is in a revocable trust. Can I get a home equity loan on it?

Response:

Most lending institutions require that property be transferred back into the name of the owner before extending a loan. However, while the mortgage document may preclude transferring the property back into the revocable trust, I’ve never actually seen anyone have a problem with doing so as long as they keep up their mortgage payments.

One of the purposes of revocable trusts is to avoid probate. In order for this to happen, the grantor’s property, including real estate, must be transferred into the trust. For real estate, this involves drafting and registering a new deed. Before taking this step, we ask clients whether they plan to refinance their home or move in the foreseeable future. If so, we generally refrain from transferring the home into the new trust in order to save the client from incurring the cost of transferring out the house again, as well as our fee for preparing the deed and the registry’s fee for recording it.

Showing 2 comments
  • Linda
    Reply

    Are you saying that we cannot get a line of equity when the property is in a revocable trust?

      • Harry Margolis
        Reply

        It’s up to the lending institution, but our experience is that you have to transfer the property out of the trust and then after the equity line has been established you can transfer it back in. That may or may not be a violation of the terms of the loan, but we’ve never seen a problem with transferring property into trust that is already under a mortgage.

      Leave a Comment

      Start typing and press Enter to search