Can You Borrow Against a Home in a Revocable Trust?
My home is in a revocable trust. Can I get a home equity loan on it?
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. So, we advise clients they can transfer their home back into their revocable after taking out the home equity loan.
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 (often called “recording”) 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.
For a couple, it’s usually more important that the house be transferred into the trust after the first spouse has died. If the couple owns the house as joint tenants or tenants by the entirety, a form of ownership that is only available to married couples, it will pass automatically to the surviving spouse upon the first spouse’s death.