Can You Put a Home That Has a Mortgage in a Family Trust?

Transferring mortgaged property to a trust is complicated, but not impossible.

Transferring mortgaged property to a trust is complicated, but not impossible.

If you want to help your family avoid probate after you die, you may put some of your property into a trust. Family trusts can hold almost anything, from real estate to bank accounts. In most cases, you can put your house in a trust, even if it still has a mortgage.

Due-on-Sale Clause

Most mortgages include a due-on-sale clause to protect the lender. If your mortgage documents include this clause, your lender can demand payment in full as soon as you sell or give the home to a new owner. Because you are no longer the home's legal owner after you transfer it to a trust, the lender may use the due-on-sale clause to force you to repay the full amount of your mortgage. To prevent this problem, ask your lender about a due-on-sale clause before you begin the transfer.

Garn-St. Germain Act

Under the Garn-St. Germain Depository Institutions Act of 1982, you can transfer your house to a trust without worrying about due-on-sale clauses as long as you meet certain requirements. To qualify for protection under this act, the property must be residential, and it must include less than five separate living units. You must also be living in the home at the time of the transfer. To ensure that Garn-St. Germain applies to your transfer, talk to an attorney.


After you transfer your home to a trust, you may have trouble refinancing the mortgage. Lenders don't like to use trust-owned property as security for a loan, even if you meet all of the other requirements. Website Nolo says lenders may agree to a refinance if you give them a copy of your trust document. If you can't find a lender who will approve the refinance with the property held in trust, the trustee can transfer the property back to your name until the refinance is complete.

Title Insurance

Transferring mortgaged property to a trust sometimes causes problems with title insurance policies. Most lenders require an active title insurance policy on your property at all times, but changing the home's ownership may cancel your current policy. Before making the transfer, ask your insurer whether you can keep the same policy with the property in trust. If you can't, set up a new policy.

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About the Author

Amanda McMullen is a freelancer who has been writing professionally since 2010. She holds a bachelor's degree in mathematics and statistics and a second bachelor's degree in integrated mathematics education.

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