Is it possible to refinance a home that is held by a Revocable Living Trust?

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Many people wonder if refinancing a home held by a trust is possible.  The short answer is yes, you can refinance your home held by your revocable living trust.  However, the lender may require a few additional steps to complete the refinancing.

Along with all the application and financial documents you have to submit, your lender may want the home transferred out of the trust to the name of the owner(s) as part of the refinance transaction.  This requirement is based on the mistaken belief that the lender cannot foreclose on the real property if the loan is not repaid if the Trustee(s) of a revocable living trust signed the refinancing paperwork instead of the owner(s).  Because most revocable living trusts grant the Trustee(s) the power to encumber trust assets, including the home, you may want to point out to the lender that this step is unnecessary, or try to find a lender who is willing to accept the Trustee(s) signing the refinancing paperwork.  If this is not possible, request that the escrow agent prepare the deed transferring the home out of the trust for the purpose of refinancing and the deed transferring the home back into your trust once the refinancing is complete.  The Trustee(s) will sign the first deed taking the home out of the trust and the owner(s) will sign the second deed placing the home back into the revocable living trust.

If the lender insists on transferring the home out of the revocable living trust, it is extremely important to ensure your home is transferred back into the trust after the refinancing is finished.  If you neglect to transfer the home back into the trust you will lose the benefits of having your home owned by a trust.  These benefits include ease of management during life and avoiding probate at the owner(s) death.  If your home is not owned by your trust at your death, once the probate process in concluded, the home would be transferred back into the trust under the provisions of your ‘pourover’ Will.

An experienced estate planning attorney can assist you in understanding the requirements for refinancing your home owned by your revocable living trust and ensuring that your home is properly transferred back into your trust once the refinancing is complete.

Contact the Estate Planning attorneys with the Law Offices of Nay & Friedenberg in Portland, Oregon at (503) 245-0894 to set an appointment.

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