Taking out a mortgage in your name and than titling to LLC.

Taking out a mortgage in your name and than titling to LLC.

Hialeah, FL · Member since 2016 · 7 posts · 0 votes

Hi to everyone,I'm a small investor and I'm new to BiggerPockets.Great site by the way,very helpful.I have a question that I haven't been able to answer.If I get a mortgage in my name and than I form an LLc and title the property to the LLC what are the consequences on that mortgage.In effect what happens if the LLc gets in a lawsuit.Will the property be liable since it is owned by the LLc and perhaps be taken by a creditor or will the mortgage still act as an equity stripping vehicle.Since the mortgage is in my name and not the LLc will the LLc have to pay the creditor and will i still be responsible for the loan,or will the Loan still attach to the property and act as a first lien even though the LLc owns the property.Will i lose the equity stripping protection of the mortgage if i put the property in an LLc.Thanks .

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  • Russell BrazilBusiness Member
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    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y

    As far as the liability I am not sure. However transferring the property to an LLC can trigger the due on sale clause where they call your mortgage due. This does not happen very often, but it does occasionally happen. I think as we enter a rising interest rate environment it may start to happen with more frequency.

  • Hialeah, FL · Member since 2016 · 7 posts · 0 votes
    10y

    Thanks Russell.I talked to a bank in my area and they are willing to put the loan in the LLc's name and i would personally back it.I would still feel better doing it this way since the mortgage is in the LLc's name and i would not risk the due on sale clause taking effect like you said.Furthermore this way the mortgage lien attaches to the property owned by the llc and not to me.I still personally guarantee it but if the mortgage were in my name and i sell the property to the LLc than as I see it i  no longer own the property ,the llc does.If the llc becomes liable than it would own the property and be at risk and i would still be personally liable for that Loan.Perhaps i'm wrong  but i'm not sure.Good question for my lawyer i suppose.

  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    10y

    If right for you to do in the first place, buy in the LLC to avoid problems with hazard insurance and title insurance, Delfin. Many quitclaim and are sitting there uninsured. Defeats the purpose of 'asset protection' I would think.

  • Hialeah, FL · Member since 2016 · 7 posts · 0 votes
    10y

    Great point Steve,completely agree ! Thanks !

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