Refinancing a Real Estate Mortgage? Watch Out!

Unfortunately, Here’s What Happens When you Get or Refinance A Mortgage

You may consider taking out a mortgage to tap the equity in your real estate and enjoy a higher quality of life or to refinance an existing mortgage and historically lower your payments. Both have become increasingly popular due to the recent significant increases in property values and low mortgage interest rates. Right now, a lot of people are scrambling to take out or refinance a mortgage because they’re concerned that market prices may be flattening and interest rates going up.

But be careful. There is a little known, big problem that often occurs when you get a mortgage or refinance an existing one. The lender transfers the title out of your Living Trust and into your individual name. This may happen, unbeknownst to you, for a number of reasons.

First, many lenders do not intend to hold your mortgage, but rather plan to sell it to a third party where it will become part of a mortgage investment "pool." These pools usually require the underlying mortgages be written only to individuals, not to a trust, corporation or other entity.

Second, in order to speed up the mortgage process, many lenders don’t want to go to the bother, time and expense of having a lawyer review your Living Trust to confirm you have the power, as trustee, to enter the loan and are obligated to repay it.

So, often the result at the end of the mortgage process is that one of your most valuable assets (or most valuable one!) is no longer titled in your Living Trust - - and is now needlessly exposed to all the above described court catastrophes.

How Can You Avoid (or Get Out of) This Title Mess?

One way is to have the lender, or the title company they use, transfer title back to you (as Trustee of your Living Trust) once the loan process is over. But they may not want to do it or may wind up causing you a property tax increase if certain key details and steps are not followed. This is why most of our clients choose to have us do it (at a very modest price).

If you got a new mortgage or refinanced one after setting up your Living Trust, you can do a check on your title using the information on your most recent property tax bill - - or have us do it for you, if you are a client of our firm. We highly recommend you come in for a free estate plan checkup meeting anyway if you haven’t within the past 3 years. (If you’re not a client, you can schedule a free estate plan review meeting).

One Other Thing…

When you come in and see us, you may also want us to prepare and have you sign a new “General Assignment” document (free if you are an existing client). Why? Because this document, assuming it is recent, can help avoid a full court Conservatorship or Probate (reduce them to a one time hearing) should any of your real estate in the future “fall out” of your Living Trust and you fail to realize it and get it back in. It’s a kind of “secondary insurance coverage”, just in case!

Do You Need to Speak With an Estate Planning Attorney?

If you need to speak with an experienced estate planning lawyer, please contact us online or call us directly at 800.756.5596 to first register for one of our free, informative seminars. Your attendance will qualify you for a special discount for our estate planning services should you decide to make a free appointment at the conclusion of the seminar and choose to proceed with us. Our estate planning law firm proudly serves clients throughout California from our main office in Torrance, as well as those in Redondo Beach, Manhattan Beach, Hermosa Beach, Segundo, San Pedro, and Rancho Palos Verdes.

When You Want the Very Best for Your Loved Ones, Choose Us.

Experience and Expertise. Estate planning and post-death administration are all we do. Our attorneys have over 70 years of combined expertise in the field, and three of our attorneys have passed an additional Bar examination and peer review process to become State Bar Certified Specialists in Estate Planning, Trust and Probate Law. Two of our attorneys also have Master’s Degrees in Tax Law, giving us unique insight into how estate tax and income tax will affect your family’s inheritance.

Customization and Attention to Detail. Before we create or update your estate plan, we get to know you, your goals, and what matters to you most. We take the time to listen to your concerns and attend to each of your unique needs and desires as if they were our own. When we complete your plan, we perform a detailed quality control process to help ensure your objectives are met. We also provide you with a personalized Owner’s Manual containing all of your important documents, and your Successor Trustee with a Manual containing helpful, plain-English checklists and easy-to-follow procedures.

Lifetime Relationship. All of our estate plans include a free ongoing service package. We take phone calls any time you have questions, perform free estate planning checkups every three years, and keep you abreast of changes in the law and planning strategies with our complimentary newsletters and educational seminars. And, when the time comes, we will be there to help your trustee and loved ones.