Why does my mortgage co want to know if I have my house in a living trust?

Question

I am trying to negotiate a better rate & one of the questions being asked is if the property is in a living trust. Why would that be important?

Answer 1

I would never recommend taking house out of the living trust if you have one, I have seen many people do this and the lacking of professional people the house is not put back in trust and the property is at risk for probate should something happen to you,  If your trust is accurate it should state it is revocable which means you can refinance in the trust, the lender needs to know if it is in a trust because the would want a living trust form completed by a notary or a complete copy of trust so they can review terms.  If anyone is telling you to take house out of trust to refinance they dont know what they are doing and you need to find a trusted loan officer

Answer 2

That is a hurdle that you have to overcome when you refinance. If you have a living trust, you can't refinance the living trust. You have to take it out, refinance & put it back in to the living trust.

Answer 3

Because  the  mortgage  company  really  owns  the  house  and  should  you  die  before  the  loan  is  paid  ,

Handling  the  sale  would  be  different  in  a   trust .

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Answer 4

Because a Living Trust has a Trustee(s), and would be the ones entitled to mortgage, lease, sell, etc.  In other words, there may be others, besides yourself, that have power to negotiate.  

Answer 5

Some mortgage companies just get weird about trusts. Many lenders don't like them. I did a refi a few months ago and my lender had me sign closing papers 5 times before they got all the paperwork right because of my trust.

If it's a problem you can always use a Bargain & Sale Deed (or Quit Claim Deed in some states) to deed the home back to your personal name and when the refi or renegotiation is complete, do another B&S deed to put it back in the trust again.

Answer 6

Because the trust is the owner and not you.  You have to take the property out of the trust, refinance it and then put it back in the trust.  This is fairly common.