How to Put a House in a Trust With a Mortgage

How to Put a House in a Trust With a Mortgage

Estate planning is an essential part of protecting your home and legacy. One tool many homeowners use is a living trust, which allows assets like real estate to pass directly to heirs—without going through probate. But what if you still have a mortgage? Can you still transfer your home into a trust?

The short answer: Yes, but it requires careful planning and lender awareness. In this guide, we’ll explain how to put a house in a trust with a mortgage, what steps are involved, and why it may benefit your family in the long run.

What Is a Trust and Why Use One for Your Home?

A revocable living trust is a legal document that lets you transfer ownership of assets—like your home—into a trust during your lifetime. You still maintain control of the property, but it is legally held by the trust.

Benefits of placing your home in a trust include:

• Avoiding probate after death 
• Speeding up inheritance for heirs 
• Maintaining privacy 
• Naming alternate decision-makers if you become incapacitated

Can You Put a House in a Trust If You Have a Mortgage?

Yes. A mortgaged home can be transferred into a trust, but the mortgage doesn’t go away. The loan stays in your name, and you remain responsible for payments.

Lenders usually allow this type of transfer without accelerating the loan due to the Garn-St. Germain Depository Institutions Act of 1982, which protects certain trust transfers from triggering the due-on-sale clause.

Step 1: Create or Update Your Revocable Living Trust

The first step is setting up a revocable living trust, which you can do with the help of:

• An estate planning attorney 
• A reputable online legal service 

You’ll need to:

• Name yourself as trustee (and possibly a spouse or co-trustee) 
• Name successor trustees 
• List beneficiaries (the people who inherit your home) 
• Define how assets are handled in the event of incapacity or death 

If you already have a trust, it may need to be updated before transferring property into it.

Step 2: Review Your Mortgage Agreement and Lender Policies

Before you transfer the deed, it’s smart to:

• Check your mortgage contract for any clauses about ownership changes 
• Call your lender to inform them of your intent to transfer the home into a trust 

In most cases, the lender will not require you to refinance or requalify. However, they may ask to review the trust document to confirm that it meets their criteria.

Step 3: Retitle the Property Into the Trust

This is a critical step that legally moves your home into the trust.

You’ll need to:

• Prepare a new deed (typically a quitclaim or warranty deed) transferring ownership from your name to the trust 
• File the deed with your local county recorder’s office 
• Pay any applicable filing fees 

Once this is recorded, your trust officially holds title to the property.

Step 4: Notify Your Homeowners Insurance Provider

After retitling, update your homeowners insurance policy to:

• List the trust as an additional insured or interest 
• Ensure your coverage aligns with the updated ownership 

Failing to update insurance could cause delays or coverage issues in the event of a claim.

Step 5: Keep Making Mortgage Payments As Usual

Even after the transfer, you continue paying your mortgage as before. The loan is still in your name, and your credit remains tied to it.

If you ever refinance or sell the home, the trust ownership may need to be disclosed or updated accordingly.

Common Issues When Transferring a Mortgaged Home Into a Trust

While generally straightforward, homeowners may face a few challenges:

• Lender confusion about trust laws (especially with out-of-state lenders) 
• Incomplete or outdated trust documents 
• Title insurance policies not updated after transfer 
• Heirs unaware of trust structure 

Working with professionals helps avoid these pitfalls and ensures your intent is carried out smoothly.

Is It Better to Put a Paid-Off House in a Trust?

It’s easier to transfer a house that’s fully paid off, but having a mortgage shouldn’t stop you from using a trust. The process is similar, though you won’t need to coordinate with a lender.

If you’re planning to pay off your mortgage early or through a refinance, that may be a convenient time to complete the trust transfer.

When Should You Consider Putting Your Home in a Trust?

You might want to consider this move if:

• You’re actively planning your estate 
• You want to avoid probate for your heirs 
• You have other assets already in a trust 
• You’re concerned about incapacity and need a backup decision-maker 

Many families place their homes into a trust in tandem with other estate planning steps—such as creating powers of attorney or wills.

Secure Your Home and Legacy With ClearKC

Putting your home in a trust—even with a mortgage—is one of the smartest moves you can make for your family’s future. While the paperwork may feel intimidating, the benefits of skipping probate and staying in control are well worth the effort.

Have questions about homeownership, refinancing, or navigating title transfers with a mortgage? Contact ClearKC today and let our experienced team help you protect your investment and your peace of mind.