What you may not know, you may not know about what occurs when you are attempting to refinance your home that is titled in a Living Trust. Also, if refinancing an investment property, you may not know what happens if the title is in an LLC or corporation.
Before you start the refinance process, we recommend you find a qualified and local mortgage company that you can sit with and go over your specific situation. Even though there are some very attractive rates through online services, we have found, after many many years, that oftentimes you do not receive the service you need and you may be exchanging a lower rate for competent service. When you deal with an online mortgage service, you may know more than the person helping you, that is a recipe for mistakes.
The lender may require the borrower to transfer the property out of the living trust and back into the borrower’s name prior to the draft of the preliminary title report by the title company. Most lenders may have a guideline that states, that in order for them to underwrite/pre-approve the loan, the ownership of the property must be in the borrower(s) individual names. The preliminary title report identifies any liens of record on the property, e.g. property taxes, easements, HOA, CC&Rs, existing loans, etc. This identifies any encumbrances on the property which the lender needs to be aware of especially those that are in a “senior” position to their new loan. The IRS, for example, will collect their money before your mortgage company.
In most cases, the lenders will have the settlement agent, i.e. title and escrow, prepare a deed and the state form which will be recorded prior to the new refinanced loan that transfers the home back to your individual name(s). After “close of escrow” it will be up to the borrowers to transfer their home back into their living trust.
In Nevada, transferring your home to or from a living trust is exempt from transfer tax as long as the state form is correctly prepared and accompanied by the supporting documentation. If you have recorded a Declaration of Homestead, prior to the refinance, this will also have to be redone because the Homestead needs to follow the last deed of record. For more information, feel free to give us a call to discuss your specific situation.
Loans on investment property sometimes referred to as a commercial loan, would generally have a higher rate than loans made to individuals on the same real estate. In Nevada, while there is the ability to request a waiver from transfer tax when deeding a property from an individual or individuals to the business entity, Nevada does not offer a waiver from that same transfer tax back to the individuals. If you are refinancing a rental property, your local lender will require you to show the ownership of the property in individual borrowers’ names. Depending on the investor’s lending guidelines for non-owner occupied properties, transferring your real estate out of the LLC or corporation will need to occur prior to or during the new loan being completed. Here again, working with a local loan officer who is experienced in rental property can save you grief, frustration, and money.
Once again, in Nevada, after the loan is closed, an exemption from transfer tax may be possible as long as the ownership of the property in the individual names and the ownership in the LLC or corporation is exactly the same.
This can be confusing. Reach out to us with any questions regarding your property’s profile.
If you own an investment property in the name of your personal living trust, please contact both your tax professional and legal counsel to discuss.
Quick Claim USA and its employees are not attorneys in the State of Nevada or in any other State or Jurisdiction. Quick Claim USA is not licensed to give legal advice and may not accept fees for giving legal advice. Should you have questions regarding any of the above items, you must seek the advice of independent legal/tax counsel of your choosing.