Refinancing Properties in a Trust

Updated December 15, 2020

If you have a property that is inside a , a or an and you want to pull some of the equity out of that property or maybe refinance the loan, what would you do?  Should you walk down to the bank and hand them your documents and ask them to refinance the loan or give you an equity line of credit on this property?  Well, you could do that but if it’s not handled correctly, you may run into problems related to whether the bank is aware that you have transferred the property into an LLC or trust, which is associated with the LLC.

My suggestions; therefore, would be to transfer the loan back into your name before going to the bank for these reasons.  If the property is residential real estate that is held in the name of an LLC the bank isn’t going to refinance it that way. They’re going to tell you to pull it out of the LLC or trust so it’s best to do it before going to them.  If a property is held in a land trust that has an assignment document linking it in the name of the LLC, this will only serve to confuse the bank and confuse the underwriters.

It is possible to remove it from the LLC but leave it in the name of the trust because banks are beginning to become more willing to refinance land or give loans on the land equity if the land is held in a land or . They will want a copy of the trust documents and they will want to be sure that there is no mention of the LLC that holds the beneficial interest. It should show either you or your spouse, for example as the beneficiary of the trust.

It is wise to seek the help of a professional if your property is held in this manner so that you can be sure all mention of the LLC  has been removed and that it is in your name before you go to the bank seeking a loan or to refinance so you have the best possible outcome from your efforts.

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