Can You Borrow Against a Home in a Revocable Trust?

 In Real Estate, Revocable Trusts

Question:

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

Photo by Tom Rumble on Unsplash

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 (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 own 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.

Related Articles:

Can I Take Out a Mortgage on a Home in a Trust?

How Do I Fund My Revocable Trust?

Revocable Trusts Work Best When Funded

What is a Revocable Trust and Why Would You Want One?

Can We Take Out a Home Equity Loan on Our House in Trust?

Showing 4 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.

      • Elizabeth Pulido
        Reply

        Ok what if the house is already paid off. The trust is in a Family Trust. Could money be borrowed on this?

          • Harry Margolis
            Reply

            There’s two issues here. First, does the trust itself permit borrowing. You’ll have to look at the trust document to see. Second, you have the same issue as with any other trust — will the bank or lending institution lend to a trust? Many feel uncomfortable doing so. And with an irrevocable trust you don’t have the work around of transferring the property back into the grantor’s name to take out the loan and then afterwards transferring it back into the trust.

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