Pulling equity from a home in a trust?!

[Teisa Leaaetoa]

Hi everyone!

I've been on here for years trying to figure out my entry into the RE world but haven't discovered what that looks like until recently. I'm Interested to know if anyone has used a HELOC from a home in a trust to purchase an additional property? My fiancé and I want to buy a home with very little of our own money and both our parents have homes with a ton of equity so we want to make use of it. It would also provide an additional stream of income since they are retired so it seems like everyone wins. Conceptually that makes sense to me but it sounds too simple to be true. Any and all tips of where to begin are welcome! We are considering the BRRRR method but trying to understand one piece of the puzzle at a time.

Thank you in advance!

Professionally, I am in business administration for a wealth mgmt company (CA) and my fiancé is a data scientist/technical analyst for an auto company (NJ). If we can help with anything you’re working on, let me know!

[Marc Winter]

It might depend on what type of trust the title is held in.  I've used inter-vivos revocable trusts dozens of times, and they are a great vehicle for what they are designed: estate planning, anonymity, and a "bit" of asset protection.

You'll need to shop for a lender that will allow your parents to close in a trust.  Some will allow, many will not.  

Your parents might have to take title out of the trust, put it into their name, close the loan, and transfer title back into the trust.

Also, be aware of any state transfer taxes that might apply when those title transfers occur.

Other than that, if your HELOC is an adjustable rate, your new 'mortgage payment' will be adjustable too. There are a few lenders that offer a fixed rate based on the actual draw time. I'd go for fixed rate every time.

Good luck!