Can You Safely Put Your Home in an LLC? | Mortgage Advice for Investors

Are you considering an investment property purchase and transferring the title to an LLC and wondering if it will trigger your lender to demand immediate loan repayment? 🤔

In this video, I'm here to share 3 Pieces of Advice so you CAN confidently place your home in an LLC without raising any red flags with your Lender. Let's dive in! 🚀

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But, first off, why does this even become an issue?

Historically, lending to an LLC is more expensive. Higher rates, more costs and normally has much less favorable terms. It's not your Grandma's 30 year mortgage. Because of all the negatives, the typical consumer that wants to purchase a rental property simply buys it in their own name.

Other possibilities are that you may have purchased the home as an owner occupied or 2nd home and now, you want to convert it to a full-time rental. Then you were advised to create an LLC to mitigate your risk.

And here we are!

But on to the question of WHAT happens when you change title from the personal to an LLC? If you look ONLINE you will see a bunch of advice telling you not to do this that it will accelerate the 'due on sale clause'.

But the Question remains, does putting title into an LLC really do this? In other words, is the lender going to require immediate repayment of the loan just because you titled your home in an LLC?

#3 is the BEST piece of advice you will ever hear on this topic. Let's get going.

My experience has been that Mortgage Companies like to get paid. When you pay them, they typically will not bother you. Just because title to the home got transferred to an LLC doesn't ring the alarm bells. What rings the bells is if you stop paying them. So, PLEASE, keep paying your lender!

Otherwise, what mainly bothers a lender is when you put their SECURITY INTEREST at risk. When ownership changes on a home and the people that are supposed to pay the loan doesn't, THIS poses risk to the lender. I mean think about it. The new owner isn't the one that the lender loaned money to, so the due on sale clause is justified.

And technically, the titling of the property to an LLC is changing ownership; however there are ways to not have that cause you problems.

HERE are my 3 pieces of advice.

1--DON'T ASK YOUR LENDER IF IT'S OK. Don't call the lender and tell them what you are doing. Bottom line is that you never know who you are going to get on the phone. My advice is to keep paying your mortgage and keep the lender blissfully ignorant.

2--DON'T CHANGE THE INSURANCE. Keep Insurance to the property in your name. This is one of the things that can tip off the lender and they'll start asking questions.

3--KEEP THE PARTIES OF OWNERSHIP THE SAME AS THE MORTGAGE. This is the BIGGIE. Make sure the LLC is owned by the same people that are on the mortgage. Eg. If you bought a property with you and your spouse, then the LLC should be owned by you and your spouse. The KEY is that the 'parties of ownership' have not changed AND it could be your get out of jail card with your lender. What you DON'T want to do is title the property in an LLC that is owned by more OR less parties. For example, don't title the property in an LLC that has 3 other partners and don't title the property to a sole owned LLC if you and your spouse (or someone else) is on the mortgage. In neither case would this match your mortgage note and it could give you problems.

All in all, putting a rental property in an LLC is not problematic if you follow my advice. Just remember, keep the ownership of the LLC with the same parties that are on the mortgage.

I'd love to know in the comments, have you had any issues with your lender after putting the home in an LLC.

#dueonsaleclause #realestate #realestateinvesting