Refinancing A Home In A Revocable Trust? Our Bethesda Estate Lawyers Explain Part 1

One smart way to protect your estate’s assets from the scrutiny of probate court is to place that property into a revocable living trust. This strategy allows you as the grantor to manage your trust, which is an entity designed to own your property with the ultimate intention of having the property passed directly to your beneficiaries upon your passing. Estate law is very complex, making these long-term goals possible through careful planning and navigation through the legalities of your unique situation. If you’re dealing with the complexities of a revocable trust, for example, it’s important to take the proper steps to secure your assets from the unknown. JDKatz is proud to be your trusted team of estate lawyers in Maryland and D.C., delivering comprehensive services for clients of all types.

From business structuring to elder law, our Bethesda estate planning attorneys rely on an experienced team of professionals to optimize the outcomes for each of our clients. We help a lot of individuals who error in trusts and estates, neglecting a form or illegally transferring ownership to a beneficiary. If you have a living trust, it is likely that your property is listed for a variety of benefits. When you refinance, through, problems can arise.

Today, we’ll highlight the process required to refinance your property, as well as the importance of your mortgage company’s guidelines for success. If you’re in need of an estate planning team that can assist in protecting your assets, call us today!

The Versatility of Revocable Trusts

Proper estate planning involves finding the right approach for your assets, and for many people, a revocable trust is a beneficial choice. This entity allows you to be in control of your estate up until your death. Many of your assets can be placed here, giving you the power to put property into and out of your trust. This ability will be very valuable later on.

The Need for Refinancing

As one of the biggest personal assets, the home accounts for a majority of the bills for most Americans. If you own property, you are likely hoping to gain value as property prices go up. For some people, though, refinancing can prove to be a smart maneuver. It is simple to think of this as buying your home again, paying off the old mortgage with a new one. A “refi” on your home can help with several issues, including:

  • High interest rates. The Feds set their interest rate, establishing the normal percentage for what you should expect to pay on a home loan. If rates are currently lower than what you are paying, refinancing may help.
  • High monthly payments. Purchasing a home in a seller’s market can often result in unfavorable payments for the new homeowners. Instead of paying an uncomfortable amount for 30 years, you can work with a lender to find better rates.
  • Negative equity. In some cases, the value of the home may be less than what it is worth. Refinancing to match the market value of the home can help to recoup wasted payments.
  • Changing terms. One example of this is private mortgage insurance (PMI). If you buy a home with a conventional loan and do not have the equity to satisfy lender requirements, PMI may be utilized as a protective measure in case you stop making payments. In most cases, investing at least 20 percent equity into your home can drop that costly PMI.

The Complications with Refinancing

In most cases, refinancing your property can be done in a relatively simple manner with your lender. A lot of paperwork will need to be signed, but in most cases, it’s roughly half the size of the stack you signed when buying your home!

When refinancing your home in a revocable trust, things can become complicated. Living trusts are meant to pass property onto beneficiaries, and when it comes to your home, lenders may not feel comfortable with lending a large amount of money to your trust. Technically, you are not in possession of the property, and if you were to pass away, your trust may not allow the property to be foreclosed on by the lender to recoup their losses. Extra precautions will need to be taken to appease your lender’s concerns.

Taking the proper steps to refinance your property that is in a revocable trust can be very beneficial in protecting your assets once you are gone. While proper estate planning can help to generate the most power for your property, it’s important to remember that this field is often very complex. Next time, we’ll continue to discuss this topic by explaining the best ways to ensure success for your refinance. JDKatz is proud to be your trusted team of estate planning attorneys in Bethesda, delivering unbeatable services to clients in Maryland and Washington, D.C. If you’re facing a problem with your will or estate, be sure to contact us for help!