Hi! My two partners and I are trying to transfer the title of our investment property to an LLC, while maintaining the same loan.
For background, only 2 of the 3 partners are on the loan and title. However, all 3 partners own an equal share of the LLC, so we want to transfer the title to the LLC. Can we do this while maintaining the same loan, so our rates don't go up? It is a second home loan.
The only way you can "Quit Claim" the title into an LLC to change the vesting is if the Bank or Lender "Allows" you to without a "Due on Sale" clause. Most banks and traditional mortgages "Do not" allow foe the property to be vested or quit claimed into an LLC unless it specifically states it on the closing disclosures.
In most cases even on DSCR loans the Bank/Lender still requires you to sing a personal guarantee even if they allow the loan to be vested into the LLC.
If your lender does not allow it you can refinance the mortgage and use a DSCR or a Portfolio loan program to take care of closing in an LLC. This would be a good idea if you want to pull any cash out to buy another property.
The only way you can "Quit Claim" the title into an LLC to change the vesting is if the Bank or Lender "Allows" you to without a "Due on Sale" clause. Most banks and traditional mortgages "Do not" allow foe the property to be vested or quit claimed into an LLC unless it specifically states it on the closing disclosures.
In most cases even on DSCR loans the Bank/Lender still requires you to sing a personal guarantee even if they allow the loan to be vested into the LLC.
If your lender does not allow it you can refinance the mortgage and use a DSCR or a Portfolio loan program to take care of closing in an LLC. This would be a good idea if you want to pull any cash out to buy another property.
A lot of people are buying houses sub to where ownership of the property transfers to the buyer but the existing loan stays in the sellers name and the buyer just takes over payments. Could you trigger a due on sale clause? Yes it is possible. Chances of that happening are very unlikely. If it is a small lender more of a chance as they might review things more carefully but larger lenders won't be looking that closely.
If you really want to change into the new LLC just make the transfer and do not inform your lender. If they do find out you can always deed it back to the original entity to avoid the due on sale.
Make sure you make sure the insurance has the original entity/owner on the policy as the policyholder or additional insured so that doesn't trigger the due on sale when sent to the lender
@Christopher Tacchi You will want to check with your currently lender to see if this would be acceptable. In most circumstances, if hard money was used to purchase the property, there will be a due on sale clause as others have mentioned that would be triggered.
If this is the case you are more than likely going to have to refinance this property out into your LLC. You're current lender might be able to assist you on this as well, if not, you will need to find another bank that will be able to accommodate this situation.
If you're currently lender wont allow for this or isn't capable of refinancing into your LLC, please let me know, I can help you out.